Apple's Strong Q3 Earnings Dampened by Supply Constraints
Apple's Q3 earnings report showed robust demand for iPhones and Macs, but supply constraints and rising memory costs capped revenue growth. The company reported $109.42 billion in revenue, beating market expectations of $108.65 billion, while adjusted EPS was $2.02, above the expected $1.89. However, excluding tariff refunds, EPS was roughly in line with estimates at $1.91.
The segment showing the strongest growth was hardware, particularly iPhones and Macs, which saw 22% and 29% year-over-year revenue increases, respectively. Revenue from Apple's Services division grew by 12%, but missed market expectations due to foreign exchange headwinds.
The company's Q4 guidance fell short of expectations, with a revenue growth forecast of 9-11% and gross margin guidance of 47-48%. The main reason for this was supply constraints on advanced process chips, which limited iPhone, Mac, and iPad shipments. Rising memory costs also squeezed profit margins, with the midpoint down approximately 160 bps QoQ.