Outgoing Apple CEO Tim Cook’s swan song sings of success as the company on Thursday announced record revenue in its second quarter, while admitting demand for some products — including the new MacBook Neo — has wildly exceeded expectations.

The company reported a March quarter record of $111.2 billion revenue, up 17% from last year. This follows another strong Q1 and means Apple now has an installed base of an astonishing 2.5 billion devices.

iPhone, MacBook Neo, Mac mini and Mac Studio led the charge during a quarter in which Cook confirmed “record” numbers of new-to-Mac customers. The iPhone 17 family, “is now the most popular line-up in our history,” said Apple CFO Kevan Parekh.

Looking ahead to the ongoing leadership transition, Cook said, “We have the right leader ready to step into the role.” For his part, incoming CEO John Ternus said: “This is the most exciting time in my 25-year career at Apple to be building products and services.”

MacBook Neo: The ‘iPhone moment’ for the Mac

It’s the MacBook Neo that truly seems to represent the “iPhone moment” for the Mac. Cook said customer response to the inexpensive laptop has been “off the charts. We set a March quarter record for customers new to the Mac, partly due to the Neo,” he said. “We under-called the level of enthusiasm that would be with it.”

Kansas City Public Schools, for example, is switching high school students from Windows laptops and Chromebooks to MacBook Neos, completing their transition to an all-Apple district, the company said.

If there are problems, it was that Apple was unable to source enough of the advanced nodes on which it builds its SOCs (processors) to satisfy demand for iPhones or Macs. That’s a challenge Cook anticipates will remain in place. “If you look forward to the June quarter, the majority of our supply constraints will be on several Mac models, given the continued high levels of demand that we’re seeing, and we have less flexibility in the supply chain than we normally would,” he said.

Cook believes it will take several months to reach supply/demand balance on those products, which is noteworthy given that they include both M- and A-series chips. He dug a little more deeply into the issue, admitting that the majority of the supply constraints relate to Macs, with huge demand for Mac mini and the Mac Studio to serve as platforms for AI and agentic AI tools.

Customers seem to recognize the power of those systems to run AI, so the company is seeing higher-than-anticipated demand, Cook said.

Records for everything, everywhere, all at once

Apple saw growth in every market, including strong double-digit growth in Greater China and the rest of Asia-Pacific. In China, the first half of the year grew at 33%. In the March quarter, revenue was up 28% — a quarterly record. The company also set new records in both developed and emerging markets, with double-digit growth in nearly every emerging market.

With 99% customer satisfaction, the iPhone 17 family set a new quarterly record as well, with revenue growing 22% year-over-year. These new devices are kicking off what Cook described as, “the strongest cycle that we’ve ever had in our history from the launch through March quarter.”

Services also set new records, up 16% on the year. iPad saw an 8% increase in revenue, while the wearables and accessories segment grew 5%. Among many other benchmarks, the company said it set all-time records for iPhone upgrades, the Mac installed base and the iPad installed base.

Apple says it expects memory costs to impact business

Apple discussed memory component price increases, confirming it did feel some impact in its March quarter, but was able to partially offset by digging into inventory. However, the company anticipates significantly higher memory costs in the current quarter, which it has modeled into its guidance. “I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business,” Cook said. “…We’ll continue to evaluate this, and as we’ve said before, we’ll look at a range of options.”

Those options could conceivably include price increases, but might also see the company redouble its push to persuade customers to purchase accessories and services to help it sustain current prices.

Artificial intelligence and R&D

Apple’s research and development spending has increased dramatically in recent quarters, with much of that investment relating to its AI development. “We’re investing in products and services, and we see opportunities in both of those,” said Cook. The company also confirmed its AI investments are seen as being strategically very important.

Apple touched on the AI work it is doing with Google. “The collaboration with Google is going well,” said Cook. “We’re happy with where things are and we’re happy with the work that we’re doing independently as well.”

A note about margins: Apple’s $31 billion Services revenue was up 16%, but delivers margins of 76.7%, while hardware sales provide 38.7% margins. Company’s gross margin was 49.3%. One way to read this is that Apple’s Services business is in position to swallow some of the component price increases Apple anticipates will hit its hardware across the rest of the year, particularly for memory.

Back in the USA

Finally, the company also confirmed that if it receives any refund on US tariffs it has already paid it intends to reinvest that cash into US innovation and advanced manufacturing. “These would be new investments and would be in addition to our prior commitments in the US,” said Cook.

Apple said it is no longer providing net cash neutral as a formal target and now intends to independently evaluate cash and debt. Looking forward, the company expects June quarter revenue to grow by between 14% and 17% with gross margins between 47.5% and 48.5%.

What the analysts say

Apple’s price target has been raised across the board following its announcement, up $10 at Wells Fargo, $15 at Morgan Stanley, and $5 at Barclays. “The results suggest Apple is continuing to weather the global memory chip crunch, pointing to the tech giant’s supply chain resilience,” said Emarketer analyst Jacob Bourne.

“The reason why shares of Apple are not up more [following the announcement] is investors wonder if the new Siri can power an encore to iPhone super cycle that wraps up this quarter. I believe the answer is yes,” wrote Deepwater Asset Management analyst Gene Munster. Wedbush analyst Daniel Ives said Apple may be entering a “golden era,” reiterating a $350 price target with all eyes on WWDC in June.

Here’s some of the most interesting data points from across the quarter:

• Earnings per share: $2.01
• Revenue: $111.1 billion, up 17% 
• iPhone revenue: $56.9 billion
• iPhone sales up 22%
• Mac revenue: $8.4 billion
• iPad revenue: $6.9 billion
• Wearables, Home and Accessories revenue: $7.9 billion
• Services revenue: $30.9 billion
• Gross margin: 49.3%

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