Apple’s strong quarter still leaves its AI question open

Apple beat Wall Street expectations in its fiscal second quarter, helped by strong iPhone demand, better performance in China, and steady margins.

The company reported about $111.2 billion in revenue and earnings of $2.01 per share. iPhone sales led the quarter, Services hit a new record, and Apple announced a $100 billion share buyback.

iPhone demand is still carrying Apple

Analysts saw the quarter as a sign that Apple’s current hardware cycle is healthy. Bank of America pointed to Apple’s installed base of more than 2.5 billion active devices as a major source of future upgrades. Evercore highlighted broad growth across products and regions, including about 28 percent growth in China.

Goldman Sachs said Apple’s results may have been even stronger without supply limits, estimating revenue could have been 200 to 300 basis points higher. JPMorgan also pointed to Apple’s margin strength, helped by pricing power, Services, and premium devices.

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AI has not become an upgrade driver yet

The bigger concern is what happens after this iPhone cycle slows. Deepwater noted that recent iPhone growth has looked like a supercycle, but Wall Street expects growth to fall to around 5 percent in 2027.

That puts more pressure on Apple Intelligence, Siri upgrades, and future software features to drive the next round of device upgrades. Oppenheimer said Apple’s AI spending is rising before it has a clear revenue impact, while Needham warned that AI demand from Amazon, Google, Meta, and others could tighten component supply and raise costs.

Apple’s quarter shows the core business is still strong. The iPhone remains the main growth engine, Services supports margins, and China is recovering. The unanswered question is whether Apple can turn AI into the next reason people upgrade.