Apple Q1 Earnings Beat Estimates, iPhone Drives Top-Line Growth

Apple AAPL reported first-quarter fiscal 2026 GAAP earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 7.17%.

Net sales increased 15.7% year over year to $143.77 billion and beat the Zacks Consensus Estimate by 4.3%. Overall, product sales (79.1% of sales) increased 16.1% year over year to $113.74 billion. Services revenues grew 14% year over year to $30.01 billion and accounted for 20.9% of sales. The figure beat the consensus mark by 1.68%.

Apple’s Top Line Rides on Strong iPhone Sales

iPhone sales jumped 23.3% year over year to $85.27 billion and accounted for 59.3% of net sales. iPhone sales missed the Zacks Consensus Estimate by 9.28%. iPhone sales benefited from strong shipments of the iPhone 17 family.

iPad sales of $8.6 billion increased 6.3% year over year and accounted for 6% of net sales. The figure beat the Zacks Consensus Estimate by 1.28%. 

Mac sales of $8.39 billion decreased 6.7% year over year and accounted for 5.8% of net sales. The figure missed the Zacks Consensus Estimate by 7.54%. 

Wearables, Home and Accessories sales decreased 2.2% year over year to $11.49 billion and accounted for 8% of net sales. The figure lagged the consensus mark by 5.72%.

Apple’s Q1 Rides on Strong Greater China Sales

Greater China sales jumped 38% year over year to $25.53 billion and accounted for 17.8% of sales. Rest of Asia Pacific sales increased 18% year over year to $12.14 billion and contributed 8.4% of total sales. The company saw double-digit growth in India.

Europe’s sales grew 12.7% year over year to $38.15 billion in the reported quarter and accounted for 26.5% of net sales. 

Americas’ sales were $58.53 billion, up 11.2% year over year and accounted for 40.7% of sales. Japan sales increased 4.7% year over year to $9.41 billion and accounted for 6.5% of sales.

Apple’s Gross & Operating Margins Expand Y/Y

The gross margin of 48.2% expanded 130 basis points (bps) on a year-over-year basis. The gross margin expanded 100 bps sequentially, driven by a favorable mix. 

Products’ gross margin expanded 450 bps sequentially to 40.7% due to a favorable mix. Services’ gross margin was 76.5%, up 120 bps sequentially.

Operating expenses rose 19% year over year to $18.38 billion due to a 31.7% increase in research & development expenses and 4.4% growth in selling, general & administrative expenses. 

Operating margin expanded 90 bps on a year-over-year basis to 35.4%.

Apple’s Balance Sheet Remains Strong

As of Dec. 27, 2025, cash & marketable securities were $144.8 billion compared with term debt of $88.51 billion. Apple had cash & marketable securities worth $132.42 billion compared with term debt of $90.68 billion as of Sept. 27, 2025. 

Including commercial paper of $2 billion, total debt was $90.51 billion as of Dec. 27, 2025.

Apple returned nearly $32 billion in the reported quarter through dividend payouts ($3.9 billion) and share repurchases ($25 billion).

Apple Offers Positive Q2 Guidance

Apple expects the March quarter’s (second-quarter fiscal 2026) net sales to grow between 13% and 16% on a year-over-year basis. Services are expected to grow at the same rate reported in the first quarter of fiscal 2026.

Gross margin is expected to be 48-49% in the second quarter of fiscal 2026. Operating expenses are expected to be between $18.4 billion and $18.7 billion.

Zacks Rank & Stocks to Consider

Currently, Apple carries a Zacks Rank #3 (Hold). 

Some better-ranked stocks in the broader Zacks Computer and Technology sector that are set to report their quarterly results are Amkor Technology AMKR, Microchip Technology MCHP and MKS MKSI. Each of the three stocks sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amkor, Microchip and MKS are set to report their respective quarterly results on Feb. 9, Feb. 5 and Feb. 17. In the trailing 12-month period, shares of Amkor, Microchip and MKS have jumped 100.9%, 43.2% and 115.6%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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