Apple (AAPL.O) released its Q2 2026 financial results (as of March 2026) after the market closed on the morning of May 1, 2026, Beijing time. Key points include:

1. Overall Performance: Apple achieved revenue of $111.2 billion this quarter, a 16.6% YoY increase, surpassing market expectations ($109.7 billion). The revenue growth was primarily driven by the iPhone and software services segments.

Apple's gross margin was 49.3%, up 2.2 percentage points YoY, exceeding market expectations (48.5%). The gross margin for software services rose to 76.7%, while the hardware segment's gross margin was 38.7% (up 2.8 percentage points YoY). The improvement in hardware gross margin was mainly due to increased sales of the iPhone17 series and the depreciation of the US dollar against the Chinese yuan.

2. iPhone: The iPhone segment generated $57 billion in revenue this quarter, a 21.7% YoY increase, meeting market expectations ($57 billion). The growth in the mobile phone segment was primarily driven by strong sales of the iPhone17 series in China and the depreciation of the US dollar against the Chinese yuan. For this quarter, Dolphin Research estimates that overall iPhone shipments increased by 5.5% YoY, with the average selling price rising by 15.3% YoY.

3. Other Hardware (excluding iPhone): All showed varying degrees of growth. The iPad segment achieved an 8% YoY increase this quarter, driven by growth in M5 Pro and A16 models. The company launched the MacBook Neo this quarter, with a starting price reduced to $599, reaching a broader consumer base and driving the Mac segment back to growth.

4. Software Services: Revenue from software services reached $31 billion this quarter, exceeding market expectations ($30.4 billion) with a 16% YoY increase. With a high gross margin of 76.7%, the software segment contributed 28% of total revenue but generated 43% of the company's gross profit.

5. Regional Revenue: The Americas remained the company's largest market, accounting for over 40% of revenue, with a 12% YoY increase this quarter. Greater China was the best-performing region this quarter, with iPhone sales in mainland China increasing by 33% YoY (according to IDC data), boosted by national subsidies for the iPhone17 256G.

Dolphin Research's Overall View: iPhone 17's Popularity Raises Questions About Whether New Siri Can Address AI Shortcomings

Apple's performance this quarter was quite strong, with both revenue and gross margin surpassing market expectations, primarily driven by the iPhone17 series and the depreciation of the US dollar against the Chinese yuan.

① Revenue Growth: Mainly driven by strong sales of the iPhone17 series. The iPhone segment grew by 22% YoY this quarter, particularly with a 33% YoY increase in shipments in the Chinese market. Although the iPhone17 series lacked significant innovation, it achieved notable success in the Chinese market. The iPhone17 256G, benefiting from national subsidies, captured market share from Android brands in China.

② Gross Margin Improvement: Despite rising storage costs, the company's hardware gross margin increased YoY, driven by the scale effect of increased iPhone shipments and the depreciation of the US dollar against the Chinese yuan. As Apple's products target the mid-to-high-end market, the impact of rising storage costs on its cost structure was relatively smaller compared to competitors, allowing the company to better absorb this pressure.

Beyond this quarter's data, the company's management provided guidance for the next quarter: Revenue is expected to grow by 14-17% YoY, corresponding to $107.1-$110 billion, with a projected gross margin of 47.5-48.5%. The iPhone segment remains the primary driver of growth for the next quarter. Despite facing significant pressure from rising storage costs, the company still provided a relatively strong gross margin guidance, reflecting its excellent supply chain management capabilities.

In addition to Apple's financial results, the market is also focusing on the following aspects:

a) CEO Transition: Apple announced a leadership transition, with Tim Cook stepping down as CEO on September 1 to become Executive Chairman, succeeded by John Ternus, Senior Vice President of Hardware Engineering.

The new CEO, Ternus, has a hardware engineering background, aligning with the competitive demands of next-generation smartphones and AI devices. Cook will remain as Executive Chairman to ensure smooth transition of global policy affairs and strategic stability.

The market generally believes that this leadership transition was a well-considered arrangement and will not lead to significant changes in Apple's strategic direction. The company will continue to focus on the strategic balance between hardware and services, maintaining product and service growth through vertical integration and supply chain advantages. Subsequent attention can be paid to the specific statements made by the company's management during the conference call.

b) Recovery in the Chinese Market: The company's performance recovery this quarter was primarily driven by increased iPhone sales in China. Breaking it down, iPhone shipments in the Chinese market increased by 33% YoY this quarter, while shipments in other markets (outside China) remained relatively flat YoY.

The iPhone17 series performed well in the Chinese market, partly because the impact of rising storage costs on iPhones was relatively smaller, and partly because the iPhone17 256G, eligible for national subsidies, posed significant competitive pressure on Android brands. This quarter, iPhone's market share in China reached 19%, up 5.3 percentage points YoY.

c) Measures to Address Rising Storage Costs: ① Signing long-term memory procurement agreements to lock in costs. Leveraging scale advantages to secure favorable memory contract prices + building up inventory in advance as a buffer. ② While developing in-house modems, reducing costs for other non-memory components. ③ Optimizing product mix or appropriately raising prices to increase the company's average selling price. Considering the gross margin guidance provided for the next quarter, the company still has the ability to mitigate the impact of rising storage costs through supply chain management.

Driven by the strong growth of the iPhone17 series, Apple's short-term performance is quite impressive. Regarding the impact of rising storage costs, the market can see that the company can dilute or absorb cost pressures through long-term agreements, supply chain management, and product mix adjustments.

However, the recent 'outstanding' performance does not alleviate market concerns about the sustainability of the company's high growth, keeping its valuation within the traditional range. With the ongoing advancement of AI and large models, the market is more eager for innovative breakthroughs from Apple in AI or the new Siri, which represent mid-to-long-term growth prospects.

Apple boasts a vast user base for its hardware, providing the company with a relatively sufficient 'buffer period.' However, if the company fails to achieve breakthroughs in AI, it may face competition from other players. Recently, there have been reports that OpenAI plans to launch an AI smartphone that breaks away from the traditional 'App model.'

Overall, Apple's short-term performance is impressive, primarily reflecting the strong sales of the iPhone17 and the company's excellent supply chain management capabilities, maintaining a relatively clear 'moat' advantage.

Behind this 'stable' performance, the market is more eager for the company to innovate and break through, enabling it to surpass traditional valuation ranges. The recent management change is also a sign of the company's 'pursuit of change,' and attention can be paid to the management's outlook and strategic plans for the future.

Here is a detailed analysis:

I. Apple's Core Business Remains 'Very Strong'

1.1 Revenue:

In the second quarter of its 2026 fiscal year (1Q26), Apple achieved revenue of $111.2 billion, a 16.6% YoY increase, surpassing market expectations ($109.7 billion). All business segments showed varying degrees of growth this quarter, particularly benefiting from accelerated growth in the iPhone segment.

From the perspectives of hardware and software:

① Apple's hardware segment grew by 16.7% this quarter. The accelerated growth was primarily driven by the iPhone segment. Boosted by strong sales of the iPhone17 series, the iPhone segment maintained growth of over 20% for two consecutive quarters.

② Apple's software segment grew by 16.3% this quarter, maintaining double-digit growth. The resolution of the Google lawsuit earlier reduced risks for the company's software business. As AI applications integrate more models, the growth momentum of the company's software business is expected to continue, even with single-digit growth in the App Store.

From a regional perspective: Revenue increased YoY in all regions. The Americas, Europe, and Greater China are the company's three main revenue sources. Specifically, the Americas accounted for over 40% of revenue, with a 12% increase this quarter. Europe maintained a growth rate of 14.7% this quarter.

Greater China was the best-performing region this quarter, with a growth rate of 28%. This was because the iPhone17 256G was eligible for national subsidies, directly driving a 33% YoY increase in iPhone sales in mainland China this quarter.

1.2 Gross Margin:

In the second quarter of its 2026 fiscal year (1Q26), Apple's gross margin was 49.3%, up 2.2 percentage points YoY, surpassing market expectations (48.5%). The improvement was primarily driven by the gross margins of both the hardware and software segments.

Breaking down the gross margins of hardware and software: Apple's software gross margin continued to rise to 76.7% this quarter. The hardware segment's gross margin increased YoY to 38.7%, benefiting from the scale effect of strong iPhone17 series sales, reduced tariff costs, and the depreciation of the US dollar against the Chinese yuan.

1.3 Operating Profit:

In the second quarter of its 2026 fiscal year (1Q26), Apple's operating profit was $35.9 billion, a 21% YoY increase. The growth was driven by both revenue growth and gross margin improvement.

Apple's operating expense ratio was 17% this quarter, up 1 percentage point YoY, primarily due to increased investment in R&D for both products and services, with R&D expenses rising by 23% YoY.

In terms of capital expenditures, compared to the hundreds of billions in quarterly investments by tech giants, Apple's single-quarter capital expenditures were only $1.97 billion, a significant 36% YoY decline. Despite increased AI investments by other companies, Apple's capital expenditures remain relatively low.

However, Apple is not neglecting AI; rather, since the company does not engage in external data center business and develops its own chips, the corresponding R&D investments for AI chips are reflected in R&D expenses rather than capital expenditures for purchased chips. The company's R&D expenses are indeed increasing, but the scale remains small compared to cloud service providers' chip purchases.

II. iPhone: Strong Sales in China Drive Growth Against the Trend

In the second quarter of its 2026 fiscal year (1Q26), the iPhone segment generated $57 billion in revenue, a 21.7% YoY increase, meeting market expectations ($57 billion). The YoY growth in the iPhone segment was primarily driven by strong sales of the iPhone17 series in China and the depreciation of the US dollar against the Chinese yuan.

From the perspective of the relationship between volume and price, Dolphin Research will examine the main sources of growth in the iPhone business this quarter:

1) iPhone Shipments: According to IDC data, the global smartphone market declined by 5% year-on-year in the first quarter of 2026. Apple's global shipments increased by approximately 5.5% year-on-year this quarter, outperforming the overall market.

The growth in the company's shipments this quarter was primarily driven by sales of the iPhone 17 series in the Chinese mainland market. With the iPhone 17 256G eligible for national subsidies, sales in the Chinese mainland region increased by 33% year-on-year this quarter (while the overall Chinese market declined by 3.6% year-on-year), making it the best-performing market.

2) Average Selling Price (ASP) of iPhones: Based on iPhone business revenue and shipment volumes, the ASP for iPhones this quarter was approximately $933, representing a 15% year-on-year increase. Affected by the iPhone 17 series and the depreciation of the US dollar against the Chinese yuan, both revenue and product selling prices in China benefited from favorable exchange rate movements.

III. Other Hardware Beyond iPhones: Return to Growth

3.1 Mac Business

In the second quarter of fiscal year 2026 (1Q26), Mac business revenue reached $8.4 billion, up 5.7% year-on-year, outperforming market expectations ($8.1 billion).

According to IDC, global PC market shipments increased by 3.8% year-on-year this quarter, while Apple's PC shipments grew by 12.7% year-on-year, outperforming the overall market. Combining company and industry data, Dolphin Research estimates that the ASP for Macs this quarter was $1,355, a 6% year-on-year decline.

This quarter, the company released products such as the MacBook Neo (with a starting price reduced to $599 to attract a broader user base), the M5 MacBook Air, and the M5 Pro/M5 Max MacBook Pro. The market response to the MacBook Neo, in particular, has been quite positive.

3.2 iPad Business

In the second quarter of fiscal year 2026 (1Q26), iPad business revenue reached $6.9 billion, up 8% year-on-year, outperforming consensus expectations ($6.65 billion), primarily driven by growth in the M5 Pro and A16 models.

More than half of the iPads sold this quarter were to new users, with double-digit growth achieved in emerging markets (India, Mexico, Thailand, etc.).

3.3 Wearables and Other Hardware

In the second quarter of fiscal year 2026 (1Q26), revenue from wearables and other hardware reached $7.9 billion, up 5% year-on-year, slightly outperforming market expectations ($7.7 billion). Growth was primarily driven by the wearables and accessories businesses.

IV. Software Services: Solid "Ecosystem Moat," Anticipation for New Siri

In the second quarter of fiscal year 2026 (1Q26), software services revenue reached $31 billion, up 16% year-on-year, outperforming consensus expectations ($30.4 billion). Even with external links allowed in the U.S. App Store, Apple's software services revenue maintained double-digit growth, reflecting the strength of its software ecosystem.

Gross margin for software services in this quarter was 76.7%, continuing to improve. With its high gross margin, the software business accounted for 28% of the company's revenue this quarter but generated 43% of its gross profit.

This quarter, the company's software services business reached all-time highs in both developed and emerging markets, while also setting revenue records in areas such as advertising, music, payments, and cloud services. The Apple App Store added new advertising slots in search results and will introduce advertising in Apple Maps in the U.S. and Canada this summer (focusing on local businesses).

Apple Intelligence now integrates dozens of capabilities, including visual intelligence and real-time translation. Regarding the much-anticipated new Siri, the company confirmed it will be launched this year.

Apple believes that AI is not a standalone feature but rather a capability based on chip and on-device AI processing, with a strong emphasis on privacy. Given the company's current R&D growth rate, which is significantly faster than its overall growth, AI investment represents an additional incremental portion.

The resolution of the Google lawsuit represents a risk release for Apple's software business. Considering Apple's ability to control its ecosystem, even if single-digit growth in the App Store becomes the norm, it will not affect the overall double-digit growth performance of its services business.

After purchasing the "Gemini" service, Apple has deepened its cooperation with Google in software. Google Gemini will provide Apple with trillion-parameter models and technical support, while underlying computations will rely entirely on on-device processing and Apple's private cloud.

If the new Siri launched this year delivers "impressive" performance, it will not only empower the company's AI capabilities but also bring more growth opportunities.

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