Apple has delivered strong quarterly results under new CEO John Ternus, exceeding revenue expectations and forecasting what could be the biggest quarter in the company’s history. However, despite solid iPhone demand, shares declined in after-hours trading as investors assessed rising costs, slowing Services growth and pressure on profit margins.

Commenting on the results, Josh Gilbert, Lead Analyst APAC and Middle East at etoro, said: “Apple has given investors plenty to like in John Ternus’ first results as CEO. The company beat revenue expectations and is forecasting its biggest quarter yet, with revenue growth of 7% to 10% expected in December. However, the market’s reaction shows that strong sales alone are not enough. Investors are increasingly focused on profitability as rising costs and slowing Services growth weigh on margins.”

Apple’s hardware business continues to drive growth, with iPhone sales increasing 17% in the September quarter, before the launch of the new iPhone Duo. Product revenue contributed nearly US$9 billion in additional sales year-on-year, more than three times the increase generated by Services.

“John Ternus has wasted little time establishing his direction, with hardware firmly at the centre of Apple’s growth strategy. Strong iPhone demand demonstrates the continued appeal of Apple’s products, but selling more devices is a harder way to generate profits than expanding high-margin subscription services,” Gilbert added.

Apple’s Services growth slowed from approximately 15% a year earlier to just under 10%, with the company forecasting growth of 8% to 9% for the holiday quarter. Meanwhile, its gross margin guidance of 45% to 46% represents a decline from nearly 48% in September, raising concerns about profitability.

China remains another important market to watch. Although sales increased 21%, revenue fell approximately US$1.2 billion short of expectations. Apple’s new foldable iPhone Duo also faces significant competition from Huawei, which holds an estimated 60% share of China’s foldable smartphone market.

Artificial intelligence is another area attracting investor attention, with Apple’s research and development spending increasing 32% during the quarter. However, questions remain over how these investments will translate into meaningful revenue growth.

“Apple is investing heavily in AI, but investors are still waiting to see the commercial returns. Expanding AI access through iCloud+ offers a potential path towards monetisation, although the company will need to demonstrate that these capabilities can support stronger Services growth over time,” Gilbert explained.

Looking ahead, Apple’s holiday-quarter performance will be a key test of its ability to sustain growth while protecting profitability.

“Apple has shown that demand for its products remains strong. The challenge now is turning that demand into sustainable, profitable growth. With margins under pressure and AI investment increasing, the holiday quarter will be an important test of Apple’s ability to deliver on both fronts,” Gilbert concluded.