Quarter 1
Q2 2026 Earnings Call — April 30, 2026
Analyst Eric Woodring (Morgan Stanley): I would love maybe, Tim, if I could ask you just to maybe contextualize the supply constraints you alluded to in your prepared remarks, meaning how much did demand outpace supply for iPhone and Mac in the March quarter? And does your June quarter guidance also reflect supply constraints for those segments? Or is that kind of an unconstrained guide as you see it today? And then a quick follow-up, please.
Executive Tim (Title): We were constrained during the March quarter. This was primarily on iPhone and to a lesser extent on the Mac. And as we talked about in the last call, the constraints were primarily driven by the availability of the advanced nodes our SOCs are produced on. If you look forward to the June quarter, the majority of our supply constraints will be on several Mac models, given the continued high levels of demand that we're seeing. For Mac, in the June quarter, there's two factors that are driving the constraints. One is that on the Mac Mini and the Mac Studio, both of these are amazing platforms for AI and agentic tools. And the customer recognition of that is happening faster than what we had predicted. And so we saw higher than expected demand. The second reason is that the customer response to Mac Neo has just been off the charts with higher than expected demand. We set a March quarter record for customers new to the Mac, partly due to the Neo. We think, looking forward, that the Mac Mini and the Mac Studio may take several months to reach supply-demand balance. And so hopefully that gives you a view of both Q2 and Q3 on the supply side.
Analyst Eric Woodring (Morgan Stanley): Thank you very much for that color, Tim. And then, Kevin, I'd love to maybe turn to you and kind of a surprise little announcement there talking about net cash neutral is still a great path, but we're no longer providing this as a formal target. Could you maybe expand on that a bit? Are we thinking about any different type of capital return policy? It doesn't seem so, but maybe... Maybe give a little bit more detail when you talk about making investments. Is that organic versus inorganic? Just maybe tease that comment out a little bit more for us. It would be super helpful. Thank you so much, guys.
Executive Kevin (Title): Yeah, let me just kind of reiterate what we said, which is really kind of more of a comment on the capital structure. But our goal of net cash neutral has really served us well. It's been a valuable framework for us and for our capital structure since 2018. We believe we're at a stage where we're evaluating cash and debt independently is really the right approach for us and allows us to make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business based on business factors and market conditions. We also believe we can manage this flexibility while also being very efficient and remaining disciplined. So with all that being said, we remain very committed to returning excess cash to shareholders.
As we talked about, our investment in the business, I think, as you know, we invest in the business first and foremost and then look to kind of return excess cash to shareholders. We've returned over a trillion dollars to shareholders from the start of the program, over $850 billion of which has been through share repurchases. And so another piece as well that's really important is as part of that, we also have increased our buyback authorization by another $100 billion. And that's on top of the leftover capacity from the prior authorization. So you can see the capital return piece is something very important to us. And as we talked about in the prepared remarks, important to the overall approach to delivering long-term shareholder value.
Analyst Eric Woodring (Morgan Stanley): Thanks so much, Kevin. Good luck, guys.
Executive Tim (Title): Thanks, Eric.
Analyst Ben Wrightsies (Milius Research): The first one is there's just been a lot of talk, and it's great to, by the way, speak with you, Tim and John and Kevin.
The first question is around there's been some commentary around an agentic smartphone. By the way, I don't even know what that means. There's comments about AI on the edge and that agents could catalyze smartphones, but also shift the smartphone kind of form factor or maybe not. I was just wondering with the rise of agents, how you would like us to think about that. Does this mean there's new products coming of a totally new form factor or does it change the game or anything high level you might want to say about that and that trend or potential non-trend? Thanks.
Executive Tim (Title): You know, we don't get into our future roadmap. And so I don't want to, you know, give too much info there. But I would just say that we're thrilled with how the iPhone is doing, growing 22 percent in the quarter and followed up from an incredible Q1. We could not be happier with it.
Analyst Ben Wrightsies (Milius Research): Thanks. I appreciate that. I'm sure we'll hear a lot more. Then with regard to, I guess, the question around constraints and whatnot, and Tim, you know, I may push you one more time. Try to do it nicely, though, just given my age. You know, the big concern out there is maybe how margins go after the June quarter, given the components and trends and whatnot and all these constraints. I mean, is there some kind of overarching philosophy that you want us to think about? Do you feel, and maybe Kevin wants to weigh in on this, do you see a lot of variability in the model? Or is 47-48 kind of a range you think you might be able to stay in? Or is there just no visibility beyond June to answer this question? I think any comfort level there as we go throughout the calendar year would be so helpful. Thanks.
Executive Tim (Title): Let me talk about memory specifically, which I think is the root of the question. So, and I'll go back to December for a moment and just walk you through the chronology. In the December quarter, we really had a minimal impact due to memory. And you can kind of see that in the gross margin results. We said it would be a bit more in the March quarter, and we did see higher memory costs in the March quarter, and they were partially offset by benefits from carry-in inventory that we had. For the June quarter and what's embedded in the guidance that Kevin went through earlier, we expect significantly higher memory costs. They are also partly offset by the benefit of carry-in inventory. And then where we don't give color beyond June, I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business. And we'll continue to evaluate this, and as we've said before, we'll look at a range of options.
Analyst Ben Wrightsies (Milius Research): Okay, thanks, Tim.
Executive Tim (Title): Yep.
Analyst Michael Ng (Goldman Sachs): First, given the success of the MacBook Neo, I was wondering if you could talk a little bit about how it's helped drive penetration with new customer segments, whether that be education or value or emerging markets? And then how do you think about opportunities in, you know, under-penetrated markets more broadly, and how will your future product roadmap inform that strategy? Thank you.
Executive Tim (Title): Right now we're supply constrained on the MacBook Neo. The response has been, we were very bullish on the product before announcing it, but we under-called the level of enthusiasm that would be with it. And it's very much focused on getting the Mac to even more people than we were reaching before. We're very focused on customers new to the Mac and customers that have been holding on to their Mac a very long period of time. We're doing well with both of those. And as Kevin alluded to in his comments, we're seeing school systems like the Kansas City Public Schools that are switching from Chromebooks and Windows PCs to the MacBook Neo. And I'm hearing anecdotally more and more of those kind of stories, both happening at the school system level and at the individual consumer level. And so we could not be happier with how things are going at the moment.
Analyst Michael Ng (Goldman Sachs): Great. Thank you, Tim. And for the second question, I wanted to ask about advertising within services. I think Apple introduced new inventory to ads on the App Store earlier this year. Has that new ad inventory on the App Store been a notable contributor to the service's growth and outperformance in the quarter? And then could you talk more broadly about your ad strategy, given the plans to also introduce ads to Maps this summer? Thank you.
Executive Kevin (Title): In advertising, we did see year-over-year growth in our advertising business. As you alluded to, we recently did introduce additional ads across the App Store search results to provide developers with more ways to drive downloads on platforms that users trust. And this summer, as you said, in the U.S. and Canada, Apple Maps will feature ads during key search and discovery moments, creating a new way for local businesses to reach customers and explore new places. But importantly, I think, you know, we believe it's possible to help businesses of all sizes grow via advertising while still delivering a great customer experience, while also importantly respecting people's fundamental right to privacy.
Analyst Michael Ng (Goldman Sachs): Thank you, Kevin.
Executive Kevin (Title): Thanks, Mike.
Analyst Wamsi Moen (Bank of America): Tim, you noted higher impact from memory as you look beyond the June quarter. Clearly, you guys have a lot of scale supply chain efficiencies, relationships from a long time. As you think about product position relative to your competitors. So when you think about product position and pricing, relative to competition, do you think in such times of dislocation that Apple would be strategically more focused on share gain or where potentially you don't raise pricing and perhaps lower ends of the portfolio where your competitors are struggling or more focused on profitability? Like what's the right framework for us to think through as you enter that period and have a follow-up?
Executive Tim (Title): We will look at a range of options with memory costs increasing. And so I really don't want to go beyond that at this point.
Analyst Wamsi Moen (Bank of America): As a follow-up here, how is Apple thinking about the broader monetization, maybe following Ben's question here in the agentic AI world? So what parts of the stack do you think Apple will be focused on internally versus maybe leveraging your partners? I mean, we have some early looks into where you are developing relationships, but as we think longer term, do you think Apple will invest more? Where will Apple invest more heavily over the next several years? And is this at all related to your net cash comments in terms of perhaps building out more infrastructure as we enter an AI-centric world? Thank you.
Executive Tim (Title): We are clearly investing more. You can see that in the OPEX numbers. And if you click down on those a step deeper and look at the R&D area separate than SG&A, you'll find that R&D is even accelerating much higher than the company is. And so we're clearly investing. We're investing in products and services. And we see opportunities in both of those. And we could not be more excited about how the future is playing out.
Executive Kevin (Title): From the start, we said we, you know, believe AI is a really important investment area for Apple, and we're going to be doing that incrementally on top of what we normally invest in our product, you know, roadmap. And so I think I just wanted to reiterate that point as well.
Analyst Wamsi Moen (Bank of America): Okay. Thanks, Tim.
Analyst Amit Daryanani (Evercore): I guess first one, maybe just going back to the iPhone performance, which for a couple of quarters, you folks have had 20% plus growth despite the supply constraint. And I think the guide sort of implies the momentum will continue in June. I'd love for you folks to just maybe double-click and talk about what are the levers that's driving this sort of impressive iPhone growth despite the supply constraints? And then, sir, what is the durability of this growth?
Executive Tim (Title): If you look at it, it's the iPhone 17 family that's driving it. And that is, as you point out, is despite the supply constraints that we're experiencing. And it's the things that are driving people to the 17 are people love the design. People love the performance. They love the durability. They love the camera. They love center stage. And they love that Apple intelligence is integrated across the platform from where we're seeing the growth. It is amazing. We're seeing double-digit growth in the majority of the markets we track, from the U.S. to Latin America to greater China to Western Europe to India to Japan to Southeast Asia. And we set a new March quarter record for upgraders as well. And, you know, what's driving all this is that the customer satisfaction for the 17 family in the U.S., as an example, is 99%. These numbers are just unheard of.
Analyst Amit Daryanani (Evercore): Perfect. Thank you. And then, Tim, I think we have you for one more earnings call, but I would really appreciate if you could kind of share a bit about the upcoming transition. You have historically talked about the advice that Steve gave you when you took over, and I might be paraphrasing this, but it was around, don't ask what I would do, just do the right thing. That's really been a big win, I think, for Apple and shareholders over the last 15 years. I would love to understand what advice are you giving John to help him build on Apple's strengths while shaping up the next chapter for the company? Thank you.
Executive Tim (Title): I think Steve's advice to me lifted a huge burden. And so that advice did well for me. And over the 15 years for John, I think my advice is that or what I told him is that one of the most important decisions he'll make is where to spend his time. And I would spend it where the greatest benefit to the company and the users are. And never forget the North Star for the company. You know, we're about making the best products in the world that really enrich other people's lives. And if you keep focusing on that and make your decisions around that, it will produce a great business and we'll be able to build more products and do it all over again. Thank you for the question.
Analyst David Vogt (UBS): Maybe, Tim, I want to come back to the supply chain for a second. I don't think I heard you state in your prepared remarks or in response to a question that the iPhone is constrained in the June quarter so can you walk through kind of how you're thinking about your ability to secure not just SOC but also memory? Are you thinking about using alternative sources of memory outside of sort of the traditional partners that you have and just what's kind of driving that confidence that the iPhone isn't constrained given the amount of share it sounds like you're taking in that market and then I have a follow-up as well.
Executive Tim (Title): The current constraint for the March quarter and the June quarter, the primary constraint is the availability of the advanced nodes our SOCs are produced on, not memory. And so I don't want to predict our ability for supply and demand to match, because if I look at it realistically, I think on the Mac Mini and the Mac Studio, I believe it'll take several months to reach supply-demand balance. And so we're not at the point where we're saying this is going to end anytime soon. And it's not because of a problem per se, other than we just under-call the demand. And, you know, there are lead times to this, as you well understand, and it takes a while to correct that. And the primary constraint from a product point of view are the majority of it for this quarter, for the June quarter, will be on the Mac. And it's Mac Mini, Mac Studio, and the MacBook Neo. It's all of those.
Analyst David Vogt (UBS): Yeah. And then maybe just on services real quick, you know, obviously... you know, relatively strong gross margins yet again. Are we getting to a point, given sort of the product mix within services, I know a lot of different offerings are growing double digits, that we're sort of asymptotically getting to a level where we're seeing, you know, increasingly more challenging to scale that business from a profitability perspective? Or is there still sort of low hanging fruit in terms of volume leverage in some of the offerings? Or maybe lower losses in some different categories that can continue to scale gross margin across the services base?
Executive Kevin (Title): Look, as you know, our services portfolio contains a wide range of businesses that have different business models and profitability profiles and also are growing at different rates. So at any given time, the relative performance of those can impact the gross margin. This time in particular, we look at the Q2 services margin. We talked about the fact that it increased 20 basis points sequentially. That's primarily driven by mix. And so again, I think it's hard to speculate how that evolves over time, but we're encouraged by what we're seeing. We do have some services that are improving in profitability as they gain scale. But again, I think we have a wide portfolio that has different characteristics and can grow at different rates at different times. But overall, we're encouraged by the overall trajectory that we've seen.
Analyst Samik Chatterjee (JP Morgan): Tim, for my first question, last quarter you did talk about Apple's foundational models and sort of the two-pronged strategy there of the collaboration with Google as well as continuing to internally sort of work on your own models. I'm hoping you can sort of give us an update in terms of how you're able to balance those two priorities as well as do you feel like you need to double down and invest more to be able to balance those two priorities side by side?
Executive Tim (Title): We are investing more. You can see that in the OPEX numbers. And as I'd mentioned before, the R&D in particular has scaled rather significantly on a year-over-year basis. The collaboration with Google is going well. We're happy with where things are, and we're happy with the work that we're doing independently as well.
Analyst Samik Chatterjee (JP Morgan): And my follow-up for Kevin, Kevin, the sequential moderation in the product gross margin this year is relatively muted compared to what you've historically seen, at least over the last couple of years. Is it primarily mix or what was the maybe the FX tailwind as well? How would we sort of break it down in terms of what was different this year relative to what we typically see? And if you could sort of also clarify what the FX impact on gross margin was for the quarter. Thank you.
Executive Kevin (Title): Basically, products gross margin did decrease by 200 basis points sequentially, driven by seasonal loss of leverage and higher memory costs, as Tim had alluded. If I zoom out, though, I think it's important just to look at what drove the overall company gross margin performance. And let me just give you a quick kind of rundown of that. If you look at our overall performance, our sequential gross margin impact was 110 basis points positively, and that was driven by favorable mix, lower tariff-related costs, and that was partly offset by seasonal loss of leverage and higher memory costs.
Executive Tim (Title): For the March quarter, the gross margin of 49.3 did include the impact of tariff-related costs. However, tariffs in the March quarter versus the December quarter were lower because we had lower product volume, as you know, sequentially from Q1 to Q2, and there was the full quarter benefit from a reduction in the IEPA tariff rates, as well as the reduced global tariff rate under Section 122. In terms of applying for a refund of tariffs paid, we're following the established processes and we plan to reinvest any amount we receive back into U.S. innovation and advanced manufacturing. These would be new investments and would be in addition to our prior commitments in the U.S. And then one last point on your FX question. We really didn't see any sequential impact related to foreign exchange as a factor going from Q1 gross margin to Q2.
Analyst Aaron Rakers (Wells Fargo): I wanted to ask about a few of the end markets. I guess particularly, Tim, if you could comment a little bit on what you're seeing specifically in China. I guess from a competitive perspective, are you seeing advantages from supply constraints impacting some of your competitors? Any thoughts on the China market? And I do have a quick follow-up.
Executive Tim (Title): We are thrilled with the performance in Greater China. The first half of the year grew at 33 percent. In the March quarter, revenue was up 28. It's a quarterly revenue record for us. The performance is really driven by iPhone, which was also a March quarter record. If you look at the individual products, the iPhone was the top selling model in urban China, the Mac Mini was the top selling desktop in China, and the MacBook Air was the top selling laptop model. We're really doing well pretty well across the board there. And I was over there in March. The traffic in our stores grew by double digit. We were celebrating Apple's 50th anniversary there, and it was just amazing to be a part of the community there. And so I'm really happy with how things have gone the first half of this year.
Analyst Aaron Rakers (Wells Fargo): And then maybe I'll stick with a similar theme, kind of the same question on the India market. It seems like that continues to be a focal point on these last several quarterly conference calls. I mean, how are you seeing the market in India evolve around, you know, the base of iPhones and the opportunity of kind of a rising middle class, just the overall opportunity set in that large mobile market?
Executive Tim (Title): I think it's a huge opportunity for us. You know, we've been focused on this for a while. It's the second largest smartphone market in the world and the third largest PC market. And despite doing extremely well there for quite some time, we still have a modest share. And so I think that really speaks to the opportunity that we have. There are a lot of people moving into the middle class there. And we've got some great products for them, both currently and coming. And if you look at the majority of customers on all of our stores, categories from the iPhone to the Mac to the iPad to the watch are new to that product there. And so it speaks very well to growing the install base there. Net-net, I'm over the moon excited about India.
Analyst: A replay of today's call will be available for two weeks on Apple Podcasts as a webcast on apple.com slash investor and via telephone. The number for the telephone replay is 866-583-1035. Please enter confirmation code 280-3309 followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific time today. Members of the press with additional questions can contact Josh Rosenstock at 408-862-1142. And financial analysts can contact me, Suhasini Chandramali, with additional questions at 408-974-3123. Thanks again for joining us today. Once again, this does conclude today's conference. We do appreciate your participation.
Quarter 2
Q1 2026 Earnings Call — January 29, 2026
take our first question from Amit Daryani of Evercore. Yes, I have two. Maybe we'll start with, you know, there's a lot of focus on the impact of memory to host a company, and I'd love to kind of get your perspective when you focus on guiding gross margins up into the March quarter. Just talk about, you know, A, your comfort in securing the bits that you need for shipment, and B, how do we think about memory inflation flowing through Apple's model over time? Yeah, a minute. Hi, it's Tim. Let me back up a bit and talk about the constraints that Kevin referred to in his remarks and memory. I'm trying to get both of these out at once. First of all, we were thrilled with the customer response on the latest iPhone lineup. It exceeded our expectations, to say the least. And, you know, iPhone grew 23%. What the result of that was, was that we exited the December quarter with very lean channel inventory due to that staggering level of demand. And based on that, we're in a supply chase mode to meet the very high levels of customer demand. We are currently constrained. And at this point, it's difficult to predict when supply and demand will balance. The constraints that we have are driven by the availability of the advanced nodes that our SOCs are produced on. And
at this time, we're seeing less flexibility in supply chain than normal, partly because of our increased demand that I just spoke about.
From a memory point of view, to answer your question, memory had a minimal impact on the Q1, so the December quarter gross margin. We do expect it to be a bit more of an impact to the Q2 gross margin, and that was comprehended in the outlook of 48 to 49 percent that Kevin gave earlier. Beyond Q2, you know, we don't obviously provide outlooks beyond the current quarter, but We do continue to see market pricing for memory increasing significantly. As always, we'll look at a range of options to deal with that. So hopefully that gives you the full view. No, thank you. I appreciate all the clarity on that, Tim. Maybe the second question I have for you is maybe just touch on the China strength you folks had. I think this is very close to all-time high revenues we've had in China. What's driving the strength over here and just sort of the durability of the growth rates we saw in the December quarter would be helpful to understand. Thank you. Sure. Greater China was up 38% year on year. It was driven by iPhone, where we set an all-time revenue record. So it was the best iPhone quarter in history in Greater China. It's driven by the customer enthusiasm for the iPhone 17 lineup.
And I would tell you that during the quarter, Traffic in our stores in China grew by strong double digits year over year. It was a terrific quarter. Our installed base reached an all-time high in both greater China and mainland China. And we set an all-time record for the upgraders. And we saw strong double-digit growth on switchers. And According to a survey from World Panel, iPhones were the top three smartphones in urban China during the quarter. And it's really driven primarily by the product strength and the customer response to the product strength. We do see on non-iPhone products, that the majority of customers that are buying a Mac and iPad, a watch, are still new to that product. So that's a very good sign for us. And if you look at iPad, on that same survey, iPad was the top tablet model in urban China. And according to CounterPoint, the MacBook Air was the top-selling laptop model and Mac Mini was the top-selling desktop model in the December quarter. So overall, great quarter in China. We could not be more happy with it. Awesome. Thank you, Amit. Operator, can we get the next question, please?
Our next question is from Eric Woodring of Morgan Stanley. Please go ahead. Great, guys. Thank you for taking my questions. Tim, congrats on announcing the partnership with Google, and we're all excited to see what you bring to market later this year. When I think about your AI initiatives, you know, it's clear there are added costs associated with that. We're obviously seeing that flow through in OpEx. Can you help us understand maybe what the revenue upside potential that exists with AI? Many of your competitors have already integrated AI into their devices, and it's just not clear yet what incremental monetization they're seeing because of AI, but you're always disciplined with investing. You obviously have a differentiated product. So how do you monetize AI, and what's the timeline to realizing that ROI? Then a quick follow-up. Thank you. Well, let me just say that we're bringing intelligence to more of what people love, and we're integrating it across the operating system in a personal and private way. And I think that by doing so, it creates great value, and that opens up a range of opportunities across our products and services.
And we are very happy with the collaboration with Google as well, I should add. Okay. Thank you, Tim. And then maybe just a follow-up. Now that you have kind of more time and data to evaluate this cycle, Can you help us understand what the primary factors are driving strength in the iPhone? I'm sure there's a number of factors, but if you had to point to one or two, just what would they be and how sustainable do you think those are? I think it's different for different cohorts of where people are coming from in the device that they have. But it's a combination of things always that make the product sing. It's the display. It's the camera. It's the performance. It's the new selfie camera. uh it's the design the design is beloved and so it's it's all of these things that that um that come together at once and and have are producing a very strong product cycle as witnessed by our december quarter results great thank you tim best of luck yep thank you awesome thank you eric operator can we get the next question please We'll now go to Michael Eng of Goldman Sachs. Please go ahead. Wonderful. Good afternoon. Thank you for the questions. I have two as well, if I could.
First, it was encouraging to hear about the revenue growth outlook of 13% to 16% for the March quarter. I was just wondering if you could talk about any comps that we should be particularly aware of as we kind of think about each of the product categories. I know last year you guys had, you know, MacBook Air with M4, the iPhone 16E, the iPad A16, and the iPad Air with M3. So just wanted to, you know, ask if those things would create tough comps or is it just less of an issue just given the new product outlook? Thank you. Yeah, Mike, it's Kevin. How are you? Thanks for the question. Yeah, I wouldn't say there's any particular – comp issue that we'd note, as you recall, last quarter, we talked about the difficult comparison, we had a Mac. But there's nothing that rises to that kind of color that we'd outline, you know, in the outlook. And so I think it's just, you know, continuation of the strong cycle, we're seeing subject to the constraints that I had mentioned in the prepared remarks that Tim, you know, alluded to a little earlier as well. Great, wonderful.
And then, you know, just on on services, you know, advertising, you know, strong in the quarter, I wanted to ask about some of the new growth opportunities in advertising. I know you guys are doing the new ad slots in the App Store. Maybe you could just talk a little bit about that and then any plans to do more in advertising across other products like maps or TV. Thank you. Yeah, sure. Like what I was saying, just if I step back in general, I think as we outlined, we saw really good broad-based performance in our crossword services business. So ranging from, you know, all-time records and advertising, music, payment services, and cloud services. So I think we see really good opportunities across a lot of our service categories. And we continue to, you know, add new service offerings. We talked about, you know, what we added to the to the wallet, the digital ID, and you referenced the additional kind of additional ads coming into search in the App Store, which we are excited about. It provides advertisers more ways to be discovered. And so I think we'll continue to look for ways to expand opportunities to add value to users and also create opportunities for Apple.
I think, as we talked about, we've created across a really significant milestone at 2.5 billion active devices, so we really feel excited about the opportunity that provides for our services business as well. Wonderful. Thanks for the thoughts, Kevin. Sure thing. Thank you, Mike. Operator, can we get the next question, please? The next question will be coming from Ben Ritzes of Melius. Please go ahead. Yeah. Hey, guys. How are you? Hi, Ben. Hey, Tim. First question is on Google partnership again. I wanted to understand how you came to that decision with regard to the AI and Siri in particular. And if there's an opportunity for you guys to share in revenue to with that partnership, like you do in search. Thanks. Yeah, we basically determined that Google's AI technology would provide the most capable foundation for AFM, I'm sorry, Apple Foundation models. And we believe that we can unlock a lot of experiences and innovate in a key way due to the collaboration. We'll continue to run on the device and run in private cloud compute and maintain our industry-leading privacy standards in doing so. In terms of the arrangement with Google, we're not releasing the details of that. Bummer.
Okay. Well, I tried. You did. So, yeah, you knew it would be me. So the –
The next question is on gross margin. You know, I'm pretty shocked. I got to hand it to you, Tim, you know, that you're able to do 48 to 49. What's really going on there? How are you doing that with this memory, the NAN prices? Is it due to mix that there's, you know, a good less hardware and more services and services margins are going up? How are you doing it? to keep it at 48 to 49. Yeah, Ben, this is Kevin. How are you doing? Let me start maybe by just reflecting on the Q1 gross margin. I think we talked about the fact that we landed at 48.2%, so just above the high end of the range that we provided on the last call. And I think if you look at that performance, you know, we were up 100 basis points sequentially. We talked about the fact that we had favorable mix. I mean, as you know, when we have a good product cycle, strong product cycle, we're seeing for iPhone, that does lend itself to a bit more favorable opportunity on the mix and leverage side. So we're having a strong iPhone cycle, as Tim outlined. And so that also translated itself. We talked about products sequentially went up by 450 basis points.
So I think in general, I think we're just seeing – you know, favorable mix dynamics as well. You know, services continue to contribute as well. That business is growing, you know, double digits, so that also is a contributor. And I think that, you know, if you looked at our guidance, you know, we're providing a similar range to where we reported in December, and there's going to be a few puts and takes. You know, we do expect to see favorable mix in the services. As you know, when we move from Q1 to Q2, that tends to be the case, and that's partly offset by a seasonal loss of leverage. So there will be puts and takes, but, you know, again, we feel pretty good about the guide of 48% to 49%, which is similar to the range we reported in December. Wow. Okay, great. Thank you. All right. Thanks, Ben. Operator, could we get the next question, please? The next question will be coming from David Locke of UBS. Great. Thanks, guys, for taking my question. Maybe Tim or Kevin, if we could pull out a little bit.
Can you help us understand how you're thinking about the overall kind of smartphone market demand, particularly given where memory prices are headed? And we've heard some conversations with some other OEMs as well as component providers that are worried about either the availability of components, potential market weakness in terms of demand destruction, if some of the actions to offset or higher prices. I know you don't give outlooks for the full year, but how are you thinking about all of those different vectors and what that might mean for the overall smartphone market and then ultimately what that might mean for demand for iPhones as we move through the rest of this calendar year? Yeah, on the supply side, I had made comments earlier about the constraint that we are seeing in Q2. And that's reflected in the revenue guidance that Kevin gave earlier. The constraint, as I've mentioned, is due to the advanced node capacity. And It's really a result of growing so well in Q1 with the 23%, and having less flexibility partly due to that in the process to increase it as much as we would like to increase it. Beyond Q2, I don't really want to comment on supply.
You know, supply is a function of a lot of things in the industry that move around a lot. So I would want to comment on that. And I commented before on memory pricing. And so hopefully that answers your question. In terms of smartphone demand, You know, we believe that based on the information that we've got is we gained share in the December quarter. Obviously, the market wasn't growing at 23%. So we feel good about doing that. But I wouldn't want to predict how the market reacts in the future. It's very difficult to do that. Got it. At the risk of not getting this answered, I'm going to follow up with, can you maybe help us understand, you know, you mentioned there's a range of options that you're looking at. How should we think about kind of like LTAs in the marketplace? I mean, is that an option as we move through the year, or is it more spot-based? From a owner perspective, particularly around memory, just want to get a better sense for how we should think about kind of the dynamics in the marketplace. It's a range, and so I don't want to get more specific than that.
I mean, there are different levers that we can push, and who knows how successful they'll be, but there's just a range of options. Great. Thanks, guys. Yep. Great. Thank you, David. Operator, could we get the next question, please? We'll now be taking questions from Wami Mohan from Bank of America. Start with pronunciation. That's fine. Thank you. Tim, on services, you were pretty impressive, 14%. And I know you said that the App Store was a record for the December quarter. But third-party data is showing a notable deceleration in App Store growth, maybe 7% in the December quarter relative to your 14% growth. I was hoping if you could maybe confirm that, and secondarily, if it's correct, what might be some of the drivers of that, and what could be things that you could do to reverse that in future quarters? I have a follow-up. Hey, Wamsi. It's Kevin here. Look, I think we want to reiterate the fact that during the summer quarter, you know, we had a quarterly record on the App Store. As you know, we don't provide, you know, specific color on how the individual services categories have done.
But, again, if we step back, I think we saw, you know, again, broad-based growth across all the different categories, also across, you know, various geographies. We had, you know, all-time records in both developed and emerging markets as well, and double-digit growth in both of those, too. And so I think, in general, you know, we don't provide, you know, the color at the detailed, you know, services level. Okay. Thanks, Kevin. I guess back to the memory-prized. I appreciate you have a range of options to address that. Historically, Apple's not used a pricing lever unless FX markets got maybe very dislocated to prevent arbitrage or issues like that. But given some of these unprecedented moves in memory, would pricing be a lever that you would be willing to pull or push outside of everything else that you can do? Yeah, I wouldn't want to speculate on that one. Okay, thanks, Jim. Yeah. Thanks, Wamsi. Operator, can we have the next question, please? I'll go to Sami. Strategy of J.P. Morgan. Please go ahead. Your line is open. Hi. Thanks for taking my questions.
Maybe for the first one, I'm just looking at your capital investment strategy. in the first quarter, which did moderate from the last one, and wondering if the partnership with Google on Gemini and sort of help collaboration to develop the next generation of Apple foundational models, does that have any near-term sort of impact on your intent to use Apple private cloud? I know you emphasize sort of the role Apple private cloud plays in the long term, but are there any changes on that front through this collaboration? Any thoughts around that? And I have a quick follow-up. Thank you. Yeah, sure. I think this is Kevin here. I think in general, you know, as Tim outlined, we weren't going to provide any details on our, you know, arrangement and collaboration with Google. Just speaking of CapEx in general, You know, as you know, we have a hybrid, you know, model for CapEx. And so I think that, you know, what happens is our CapEx can be volatile, independent of kind of the volume of performance of our business.
And as you know, our CapEx is made of several different line items that include tooling, our facilities, retail investments, investments in our retail store, data centers, and And on tooling and data centers, we leverage this hybrid model that I mentioned before, which we leverage a combination of first and third party capacity. So in general, it's hard to read into the CapEx and draw any conclusions. And so I think I would just say there's going to be some ebbs and flows in CapEx. Last year, remember, we did build out our private cloud compute environment. And so we did have CapEx spending related to that in our results in December. Got it. And my follow-up probably is for you again. You did mention product gross margin and the sort of drivers there for the product gross margin improvement. When you sort of highlighted mix as a driver, can you just sort of talk through what are the big differences in mix you're seeing for iPhone 17 versus 16? And did tariffs and tariffs coming in more favorable play a role at all? And what are you expecting for tariffs for the next quarter? Yeah, so there's a few things to unpack there.
So on the overall margin on product side, I think I mentioned that we had favorable mix of products and leverage. I think given the strong iPhone cycle we're seeing, that was – I would say probably a higher favorability than you might have seen in maybe other cycles. And as well, as you know, in Q1, typically we do see the impact of the cost structure of our new products that we launch. And in this case, we were seeing a more favorable offset from mix of products and leverage versus historical, you know, sequential changes from Q4 to Q1. On the tariff piece, we had outlined an amount of $1.4 billion for the December quarter, and we landed roughly in that range, you know, at that level. Thank you. Awesome. Thank you, Samek. Operator, could we have the next question, please? We'll now go to Krish Sankar of TD Cowen. Please go ahead. Yeah, thanks for taking my question. The first one I have for us for Tim, I think you touched upon this earlier on the Gemini integration and Apple Foundation model.
How to think about kind of like the, you know, the difference between Apple Foundation model functionality and third-party models? Like, you know, does the Apple Foundation model evolve to a different layer in the AI software stack? How to think about it as you partner with third-party frontier models? I had a follow-up. Yeah, Chris, you should think of it as a collaboration. And we'll obviously independently continue to do some of our own stuff. But you should think of what is going to power the personalized version of Siri as a collaboration with Google. Got it. Awesome. And then a quick follow-up for maybe Kevin or Tim, just, you know, a lot of discussion on memory pricing. Given that the memory constraint or commodity scarcity is impacting both the smartphone and the PC markets and Apple arguably having more purchasing power, do you think this is a chance for you to increase your market share both in iPhone and Mac at the expense of competition who might have more constraints in getting access to memory? Yeah, I don't really want to talk about kind of what has happened. And we do believe, as I had shared, that iPhone gained share in the December quarter.
And if you look at Mac for the full year of full calendar year 25, we also believe we gained share. And so we feel very good about our position. Thanks, Tim. Yep. Thank you, Krish. Operator, could we have the next question, please? When I go to Atif Malik calling from Citi. Please go ahead. Hi. Thank you for taking my question. The first one for Tim. Tim, some of the industry pundits are comparing the iPhone 17 upgrade cycle to the 2020-2021 years. as some of the iPhone 12, 13 users upgrade. Curious if you agree with that view, and also if you can layer on the impact from Apple intelligence to the refresh rate. I think each iPhone cycle has its own unique characteristics, and so I wouldn't compare it to a specific one. I think iPhone 17, the family of 17, is a unique product that brings – several very compelling features in one product, and it has done extremely well. And so we feel, you know, quite good about it. And I'll just add to Tim's comment that we talked about the fact we have a large and diverse install base of customers, and so this product has really resonated with multiple cohorts, whether you're on older devices or newer iPhones as well.
So we've seen really strong reaction to the product lineup. Great. As my follow-up, there was a lot of discussion on supply constraints, and I'm surprised that you guys are constrained on advanced packaging as you generally get your share at the big foundry. How long will these supply impact your ability to ship to true demand? It's difficult to estimate demand when you haven't met the demand. And so obviously we have internal estimates on that, but I don't want to share those. But it's very difficult. And just to be clear, it's the advanced nodes that we, like 3 nanometer to be specific, where our SOCs are, the latest SOCs are produced on as to what is gating the Q2 supply. And it's a direct result of the 23% growth and, you know, that far outstripping what we had internally estimated and having more limited flexibility in the supply chain for some period of time. I don't want to estimate when supply and demand will balance at this point. Thank you, Atif. Operator, could we have the next question, please? The next question will be coming from Aaron Rakers, calling from Wells Fargo. Please go ahead. Yeah, thanks for taking the question.
I have two as well, and I'll try and stay away from the memory question. I'm curious, and, you know, obviously a lot of focus on the China demand, but I'm curious, you also called out India. And so can you maybe unpack some of the things that you're seeing in the Indian market, you know, as far as iPhone traction, any kind of color on that? You know, what is a very large install base in India that seems to be a good growth opportunity for Apple still? Yeah, thanks for the question. We did set a quarterly revenue record during the December quarter. And to go a little further down, we set quarterly revenue records on iPhone and Mac and iPad and an all-time revenue record on services. So it was a terrific quarter in India. We really like what we see there. It's the second largest smartphone market in the world and the fourth largest PC market. And we still have, despite a very nice growth history, we have modest share there. And so we think there's a huge opportunity for us there. And we could not be more excited about it.
If you look at the other thing that I would point out is that the majority of customers that are buying iPhone and Mac and iPad and watch are all new to that product. And so it speaks very well to opportunity there. Yeah, and Aaron, I know you mentioned the install base. We're seeing strong double-digit growth in the install base in India as well, which is really encouraging. Yep. And then as a quick follow-up, you know, kind of tied to memory, maybe not so much, but, you know, part of this current generation, you know, iPhone cycle is you clearly deepen some of your own internal silicon capabilities on the device. I'm curious if that, if we should think about that as a lever and maybe a supportive factor to gross margin that might be underappreciated and, you know, any thoughts on, you know, where we go from here as far as continual opportunities of internalizing your own silicon? Thank you. Yeah, I'll let Kevin talk about the gross margin. But in terms of the product, which is at the heart of what we think about in the user, Apple Silicon has just been an incredible game changer for us, starting with iPhone and then on iPad and, of course, the Mac as of a few years ago.
And so we believe it's a game changer and a major competitive advantage. Yeah, and as far as impact on gross margin, you know, we have been, as you know, investing in core technologies like our own silicon, our own modem, and certainly while those do provide opportunities for cost savings and can be reflected in margins, they also importantly provide, you know, the differentiation that's really important for our products as well and give us more control over our roadmap. So I think there's a lot of strategic value to it, but also we are seeing, you know, investments in our core technologies impacting, you know, gross margin in a positive way. Yep. Thank you. Awesome. Thank you, Aaron. Operator, could we have our last question, please? Most certainly. Our last question will be coming from Richard Kramer calling from Areth Research. Please go ahead. Thanks very much. I have two questions.
Tim, when you think about how Apple might manage AI, do you see that evolving towards more edge AI or on-device services versus cloud-based AI? And are you confident you've reserved sufficient data center capacity to support the widespread Siri adoption, especially given that you're not following the other hyperscalers and sharply increasing CapEx? The answer is that we see both being important, the on-device and the private cloud compute. And so we don't see it as an either-or. We see it as a both. And we believe it's a differentiator because of our privacy approach. In terms of do we have enough capacity, it's hard to estimate with precision what the demand will be. But we've done sort of the best job that we can do and either have or are putting capacity in for it. Okay. And you also, you mentioned the 2.5 billion active device number, but Apple intelligence features have only been available since the 15 Pro. So can you speak at all to roughly what portion of your iPhone or overall active device install base is now AI capable? And has this been a factor in maybe a more gradual pace of launching wider AI services? Yeah, Richard, this is Kevin.
You know, we don't provide that specific number, but it is a growing number, as you can imagine, in our install base. And so we're encouraged by the amount of devices now that are capable. But we're not going to provide a specific figure on that today. Okay. Well, I had to try. Thank you. All right. Thank you, Richard. A replay of today's call will be available for two weeks on Apple Podcasts, as a webcast on apple.com slash investor, and via telephone. The number for the telephone replay is 866-583-1035. Please enter confirmation code 890-2968, followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific time tonight. Members of the press with additional questions can contact Josh Rosenstock at 408-862-1142, and financial analysts can contact me, Suhasini Chandramouli, with additional questions at 408-974-3123. Thanks again for joining us today. Once again, this does conclude today's conference. We do appreciate your participation.