Apple beats with revenue up 12% to $114.5bn and iPhone up 17%, while China misses estimates.
Gurman expects December guidance to disappoint because it hinges on the iPhone Duo.
Gurman says services revenue will fall as users shift to Gemini, ChatGPT, Claude and Muse unless Apple monetizes AI search.
Apple beats on iPhone as its product year thins out
Apple's quarter beat on the iPhone 18 Pro and continued iPhone 17 Pro Max demand, but the company is coming off a thin product year, with little shipped in the fall and the Duo still supply constrained. December guidance rests on the Duo. The services line leans on a Google search revenue share that AI assistants and Siri AI will erode unless Apple monetizes AI search itself.
Takeaways
Apple beat, but guidance depends on iPhone Duo. Revenue rose 12% to $114.5bn and iPhone revenue climbed 17% to $57.6bn, a top-line beat, though China sales fell short. Gurman expects December-quarter guidance to be less impressive, and Apple will not disclose the Duo mix.
Apple's fall lineup slipped to the holiday quarter. There is no regular iPhone 18, the iPhone 18 Pro is the smallest year-over-year upgrade in a long time, and the MacBook Pro with Touch, Home View, HomePod Mini, Apple TV and OLED iPad all slipped.
Services growth slows as search shifts to AI. A big chunk of services revenue is a share of Google search in Safari. As users move to the Gemini, ChatGPT, Claude and Muse apps or to Siri AI, that revenue falls unless Apple monetizes AI search on its platforms.
Duo shortages could lift later quarters. Apple books revenue only once a customer receives a device, so supply-chain shortages push sales forward and could give Apple a tailwind into Q2, Q3 and Q4 of next year. Gurman does not think pent-up demand will hurt.
ChatGPT outruns Apple, but Siri AI suffices. Gurman spent the weekend with ChatGPT, calls it a game changer and an answer to Claude and Muse, and says Apple has nothing close. Siri AI runs on the Gemini model and is fantastic for 90% of use cases.
Ternus wants Apple running faster and leaner. In his first earnings call, new CEO John Ternus pushed for a leaner company. Layoffs and cost-cutting are continuing and Gurman expects more. Tariffs remain Apple's big political issue whoever wins the midterms.
What Apple ships next
The touchscreen MacBook Pro goes on sale Friday. Gurman is excited for it even though he says it is not revolutionary.
The Home View goes on sale in a couple of weeks.
iPhone Duo supply should ease in February or March, when it should not be hard to get.
Next year will be an extremely strong year for AI wearables, with smart glasses and AirPods with cameras among them, areas where Gurman says Apple is excelling.
Robotics and AR glasses are the open questions for 2028 to 2030.
The cash behind Apple's AI gap
Tap a name to go there · tap a line to see why they are linked
On this episode 4
Show 1
Caroline Hepker says Apple was punished for having no AI strategy, but that leaves it with an enviable free cash flow position while hyperscalers spend heavily.
Gurman says there is zero evidence Apple will use its cash to build a strong AI strategy.