Apple (AAPL) Q2 FY26 earnings call: guidance and Q&A

How much did demand outpace supply for iPhone and Mac in Q2 FY26, and does the June quarter guidance reflect continued supply constraints for these segments?

Tim Cook stated that iPhone and Mac were constrained in the March quarter, primarily due to advanced SoC availability. For the June quarter, the majority of supply constraints will be on several Mac models (Mac Mini, Mac Studio, MacBook Neo) due to higher-than-expected demand, and it may take several months to reach supply-demand balance for these Mac models.

“For Mac, in the June quarter, there's 2 factors that are driving the constraints. One is that on the Mac Mini and the Mac Studio, both of these are amazing platforms for AI and Agentic tools. And the customer recognition of that is happening faster than what we had predicted. And so we saw higher-than-expected demand. The second reason is that the customer response to Mac Neo has just been off the charts, with higher-than-expected demand.”

asked by Erik Woodring · answered by Timothy Cook

Could you elaborate on the decision to no longer provide 'net cash neutral' as a formal target and whether this indicates a change in capital return policy or investment strategy (organic vs. inorganic)?

Kevan Parekh explained that discontinuing the net cash neutral target allows for more optimal economic decisions by evaluating cash and debt independently, based on business factors and market conditions. He reiterated the commitment to returning excess cash to shareholders, highlighting the new $100 billion share repurchase authorization and the 4% dividend increase, emphasizing continued discipline in capital allocation.

“Our goal of net cash neutral has really served us well. It's been a valuable framework for us and for our capital structure since 2018. We believe we're at a stage where we're evaluating cash and debt independently is really the right approach for us and allows us to make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business based on business factors and market conditions.”

asked by Erik Woodring · answered by Kevan Parekh

With the rise of agents and AI on the edge, how should investors think about the potential for new products or changes in smartphone form factors?

Tim Cook declined to discuss future roadmaps but expressed satisfaction with the iPhone's current performance, noting its 22% growth in the quarter and the iPhone 17 family being the strongest cycle in history. He did not provide specific details on new form factors or agentic smartphones.

“We don't get into our future road map. And so I don't want to give too much info there. But I would just say that we're thrilled with how the iPhone is doing, growing 22% in the quarter and followed up from an incredible Q1 and having the strongest cycle that we've ever had in our history from the launch through March quarter. We could not be happier with it.”

asked by Benjamin Reitzes · answered by Timothy Cook

What is the outlook for gross margins beyond the June quarter, given increasing memory costs and supply constraints, and can Apple maintain its current margin range?

Tim Cook explained that memory costs had minimal impact in the December quarter, increased in the March quarter (partially offset by inventory), and are expected to be significantly higher in the June quarter (also partially offset by inventory). He stated that beyond the June quarter, memory costs will drive an increasing impact on the business, and the company will evaluate a range of options.

“For the June quarter and what's embedded in the guidance that Kevan went through earlier, we expect significantly higher memory costs. They are also partly offset by the benefit of carry-in inventory. And then where we don't give color beyond June, I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business.”

asked by Benjamin Reitzes · answered by Timothy Cook

How has the MacBook Neo driven penetration in new customer segments like education or value markets, and what are the broader opportunities in underpenetrated markets?

Tim Cook stated that the MacBook Neo is currently supply-constrained due to higher-than-expected demand. It is successfully attracting new Mac customers and those upgrading from older models, with examples like Kansas City Public Schools switching from Chromebooks and Windows PCs. He expressed happiness with its performance in reaching more people.

“Right now, we're supply constrained on the MacBook Neo. The response has been -- we were very bullish on the product before announcing it and -- but we undercalled the level of enthusiasm that we'd be with it. And it's very much focused on getting the Mac to even more people than we were reaching before.”

asked by Michael Ng · answered by Timothy Cook

How is Apple thinking about monetization in the Agentic AI world, its internal vs. partner-leveraged stack focus, and whether the net cash comments relate to building more AI infrastructure?

Tim Cook confirmed that Apple is investing more, particularly in R&D, which is accelerating significantly year-over-year, across both products and services. Kevan Parekh added that AI is a critical investment area, with incremental spending beyond normal product roadmap investments. They did not directly link this to the net cash comments but emphasized increased investment.

“We are clearly investing more. You can see that in the OpEx numbers. And if you click down on those a step deeper and look at the R&D area separate than SG&A, you'll find that R&D is even accelerating much higher than the company is. And so we are clearly investing.”

asked by Wamsi Mohan · answered by Timothy Cook

What are the key levers driving the impressive iPhone growth despite supply constraints, and what is the durability of this growth?

Tim Cook attributed the growth to the iPhone 17 family's design, performance, durability, camera, Center Stage, and Apple Intelligence integration. He highlighted strong double-digit growth across most markets and a new March quarter record for upgraders, driven by 99% customer satisfaction for the iPhone 17 family in the U.S.

“If you look at it, it's the iPhone 17 family that's driving it. And that is, as you point out, is despite the supply constraints that we're experiencing. And it's the things that are driving people to the 17 are people love the design. People love the performance. They love the durability. They love the camera. They love center stage. And they love that Apple Intelligence is integrated across the platform.”

asked by Amit Daryanani · answered by Timothy Cook

What advice is Tim Cook giving John Ternus as he prepares to take over as CEO, building on Apple's strengths and shaping its next chapter?

Tim Cook shared that his advice to John Ternus is to focus on where to spend his time for the greatest benefit to the company and users, and to never forget Apple's North Star: making the best products to enrich people's lives. He believes this focus will lead to a great business and continued innovation.

“For John, I think my advice is that or what I told him is that one of the most important decisions he'll make is where to spend his time. And I would spend it where the greatest benefit to the company and the users are. And never forget the North Star for the company. We're about making the best products in the world that really enrich other people's lives.”

asked by Amit Daryanani · answered by Timothy Cook

What are Apple's observations on the China market, including competitive dynamics and any advantages from competitors' supply constraints?

Tim Cook expressed satisfaction with performance in Greater China, noting 33% growth in the first half and 28% in the March quarter, a record. iPhone was the top-selling model in urban China, and Mac Mini and MacBook Air were top-selling desktop and laptop models, respectively. He highlighted strong traffic in stores and overall positive performance.

“Yes. We are thrilled with the performance in Greater China. The first half of the year grew at 33%. In the March quarter, revenue was up 28%. It's a quarterly revenue record for us. The performance is really driven by iPhone, which was also a March quarter record.”

asked by Aaron Rakers · answered by Timothy Cook

How is the India market evolving, and what is the overall opportunity for Apple given the rising middle class and mobile market size?

Tim Cook sees India as a huge opportunity, being the second-largest smartphone market and third-largest PC market globally. Despite current success, Apple has a modest share, indicating significant growth potential. He noted a rising middle class and that the majority of customers across all product categories in India are new to those products, which bodes well for growing the installed base.

“Yes. I think it's a huge opportunity for us. We've been focused on this for a while. It's the second largest smartphone market in the world and the third largest PC market. And despite doing extremely well there for quite some time, we still have a modest share. And so I think there's -- that really speaks to the opportunity that we have.”

asked by Aaron Rakers · answered by Timothy Cook