Apple Stock Falls Despite Earnings Beat as China and Services Miss Estimates

Apple reported stronger than expected quarter earnings on Thursday, driven by robust iPhone sales, but shares dropped sharply after Services revenue and Greater China sales fell short of forecasts.

Strong iPhone Sales Drive Revenue Beat

Apple posted earnings per share of $2.02 on revenue of $109.4 billion, topping analyst estimates of $1.89 EPS and $108.8 billion in revenue. That marks a jump from $1.57 EPS and $94 billion in revenue during the same quarter last year. iPhone revenue reached $54.2 billion, ahead of the $53.5 billion expected and up sharply from $44.5 billion a year earlier. Despite the strong results, Apple stock fell more than 7.6% in premarket trading Friday.

Services and China Weigh on Results

Services revenue, Apple’s second-largest business, came in at $30.7 billion, below the $31.3 billion projected, while Greater China revenue reached $18.8 billion, short of the $19.5 billion analysts expected.

Rising Costs and Leadership Transition Ahead

Apple has raised prices on Macs and iPads due to increasing memory and storage costs tied to the broader AI industry buildout, with iPhone prices expected to rise at the company’s September event. Jefferies analyst Edison Lee warned that rising memory costs could pressure iPhone margins, while KeyBank’s Brandon Nispel cautioned that higher prices could slow unit growth and, in turn, Services growth. Apple’s newly announced device leasing program, Apple Upgrade, may help offset some of that pressure. Thursday’s earnings call was Tim Cook’s last as CEO before John Ternus takes over on September 1.