A few quick thoughts about Apple’s latest financial results, which featured record third-quarter revenue (depicted here in chart form, of course) and a few interesting details in the post-results phone call with analysts.
The ratchet effect
On our YouTube reaction video, Dan suggested that this quarter, which was essentially “boring” and yet generated $95 billion in revenue, means that Apple is about to enter an era where it breaks $100 billion in revenue in its dull quarters.
I think he’s right. Apple is so big and has so many customers that it just slowly gets larger and larger. Every quarter, Apple trumpets the increase in its global installed base of devices, and this quarter was no different. Every quarter, Apple cherry-picks some specific stats about new buyers that boggle the mind—over half of this quarter’s iPad and Apple Watch buyers were buying their first one of those products?! But that’s how you grow the installed base and keep that revenue line going up.
One of the advantages of Apple having a range of different products is that there are so many opportunities to convert people to other parts of the ecosystem. If we assume that for most people the iPhone is the entry point, then selling them AirPods is a logical next step, followed perhaps by an Apple Watch. But when it comes time to buy a new computer, or give a tablet a spin, why wouldn’t the Mac or iPad be at the top of the list? And of course, services revenue is a part of the story too.
For all the hand-wringing about Apple’s long-term fate in the Chinese market, Cook took time out to point out that “the MacBook Air was the top-selling laptop model in all of China, and the Mac Mini was the top-selling desktop model in all of China.” That’s a market undoubtedly driven by iPhone, but some of those iPhone customers are now becoming Mac customers. The revenue ratchet continues.
Apple doesn’t have a lot of one-time customers, is what I’m saying. And that’s why the boring quarters are soon going to be in the triple digits of billions.
Mentioning the unmentionable
Apple always has to disclaim itself when it discusses the future, because all of these disclosures are tightly regulated, and it opens itself up to pain and legal penalty if it’s found to be fibbing. This quarter’s disclaimer, given by CFO Kevan Parekh at the start of the call, was a little different. See if you can spot it:
As we move into the September quarter, I’d like to review our outlook, which includes the types of forward-looking information that Suhasini referred to. Importantly, the color we’re providing assumes that the global tariff rates, policies, and application remain in effect as of this call, the global macroeconomic outlook does not worsen from today, and the current revenue-share agreement with Google continues.
I believe this is the first time Apple has directly referred to the threat of losing Google search revenue in the context of its financial results. It’s an enormous source of profit for the company, and if a court orders that the deal with Google be voided, it will hurt, no matter what fallback Apple figures out.
It’s also worth noting the wording around tariff rates, given that those seem to change at the drop of a hat. Apple’s trying to project the future based on today, but so far as we know, all the rules could change tomorrow. It’s that kind of world.
(This is why, by the way, Apple ascribes some of its stronger sales this quarter to “pull-ahead”—namely, in April a bunch of people in the U.S. rushed out and bought new iPhones or Macs a little earlier than they might otherwise have done because they were concerned that all the prices were about to go up due to tariffs.)
Watch Tim pivot
There was a two-sentence sequence in the analyst call that provided a really clear look into Tim Cook’s worldview—both his personal inclinations and the realities of being a tech CEO in 2025. Answering a question about tariffs from Amit Daryanani of Evercore, Cook said:
In terms of what we do to mitigate, we obviously try to optimize our supply chain. And ultimately, we will do more in the United States.
Step one: Always be optimizing your supply chain! The most Tim Cook thing one could ever say. But step two: Do more in the United States, because it’s what the government demands. I’ve thought for a while now that Tim Cook is not actually a cheerleader for Chinese manufacturing, but he is always going to make optimal and expedient decisions that give Apple the best deal. In the current environment, the calculus has shifted toward doing more in the United States.
AI investment and acquisition
When you want to ask Apple why it’s seemingly struggling with AI, but you’re a financial analyst and you want to try and get some sort of serviceable answer, you ask about capital and R&D investments. Which nets you a response like this from Tim Cook:
We are significantly growing our investment. We did during the June quarter, we will again in the September quarter. I’m not putting specific numbers behind that at this point, but you can probably tell in the guidance that things are moving up. We are also reallocating a fair number of people to focus on AI features within the company. We have a great team and we’re putting all of our energy behind it.
In other words, Apple is “significantly” increasing what it spends on AI, as well as taking people internally and re-tasking them. This sends a signal to the market that Apple’s taking the threat seriously, which is what Apple feels that it needs to do.
There’s also the subject of whether Apple should buy an AI company. Analyst Atif Malik of Citi approached this topic by asking generally about whether Apple needed to do a spot of Mergers & Acquisitions to speed things up, or if it could just focus organically? And Tim Cook took that personally, I think, because his response was direct (okay, direct for an analyst call) and to the point:
We’ve acquired around seven companies this year, and that’s companies from all walks of life, not all AI oriented, and so we’re doing one—think of it as one every several weeks. We’re very open to M&A that accelerates our roadmap. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature. But we basically ask ourselves whether a company can help us accelerate a roadmap.
Leaving aside the utterly broken metaphor of accelerating a roadmap, you can see Cook proudly pointing out that Apple does buy companies all the time, actually, before elaborating on why Apple tends to buy companies: not to figure out where to go, but to acquire a company that will help it get to its desired destination. Of course, there are always exceptions to the rule, but this isn’t a bad snapshot of Apple’s overall attitude. Apple might feel it needs to acquire companies to get what it needs, but it’s the one setting the agenda. Unfolding the roadmap? I don’t even know anymore.