Apple(AAPL -0.21%) reported results for the fiscal third quarter ended June 28, 2025, with services revenue reaching a record $27.4 billion, up 13% year over year, and iPhone 16 upgrades driving category records.
Management issued guidance for mid- to high single-digit year-over-year revenue growth in the fiscal fourth quarter, highlighted significant artificial intelligence (AI) capital expenditures, and detailed expanding U.S. supply chain investments amid ongoing global tariff and regulatory challenges.
The following analysis provides three distinct insights on services momentum, AI investment, and geographic performance, followed by a summary of management’s forward-looking guidance.
Services revenue sets new record for Apple
Services delivered the company’s largest-ever quarterly revenue at $27.4 billion, up 13% year over year, with broad-based acceleration across categories and double-digit paid account growth. New offerings, such as the Apple Games app and Wallet expansion, contributed to over one billion paid service subscriptions and sequential engagement growth.
"We saw a sequential acceleration across a majority of the categories, including cloud services, where we reached an all-time revenue record driven by the year-over-year growth of iCloud paying accounts. We saw strong momentum during June, and the growth of our installed base of active devices gives us great opportunities for the future. Customer engagement across our services offerings also continued to grow. Both transacting and paid accounts reached new all-time highs, with paid accounts growing double digits year over year. Subscriptions also grew double digits. We have well over a billion paid subscriptions across the services on our platform."
— Luca Maestri, CFO
This sustained services growth, driven by both new and existing offerings, reinforces the company’s ability to diversify revenue streams and maintain high-margin expansion, even as hardware categories face cyclical pressures.
AI investment accelerates, raising Apple’s capital expenditure
Management identified AI as a primary driver of increased capital expenditure, with investments in private cloud compute, first-party data centers, and new Siri features expected next year, alongside the reallocation of internal talent. The company’s hybrid infrastructure strategy leverages both in-house and third-party resources to support these initiatives.
"I would say a pretty significant driver, as Tim talked about, is the fact we are increasing our investment significantly in AI. So that is certainly a component of it. As you know, we've been investing in private cloud compute, also in our first-party data centers. The other piece, as you know, is we do have a hybrid strategy where, in cases, we do use third parties to make capital investments, and we also invest in our own. So you are going to see an increase in CapEx. We also, from time to time, have other investments in facilities and tooling. But I would say a significant portion of the driver of growth that you're seeing now is really driven by some of our AI-related investments."
— Luca Maestri, CFO
Substantial AI-related capital expenditures signal a long-term commitment to platform innovation, positioning the company to compete in emerging AI-driven markets and enhance product differentiation across its ecosystem.
China performance highlights Apple’s competitive resilience
Revenue in Greater China expanded by 4% quarter over quarter, supported by local government subsidies and strong iPhone 16 demand, resulting in an all-time high installed base and leading sales positions for both Mac and iPhone models in urban China. The MacBook Air and Mac Mini achieved top-selling status in their respective categories across the region.
"We did grow in Greater China by 4% during the quarter versus the previous quarter. It was driven by an acceleration by iPhone, although we also had substantial growth on the Mac year over year. As you know, the government has placed certain subsidies that affect some of our products, not all of them, but there are some of them. And I think that had some effect. It was the first full quarter of the subsidy playing out. It cut in during a portion of the previous quarter. The other things I would say are that the installed base hit a record high in Greater China. We set an all-time record for the iPhone installed base. The iPhone upgraders in Mainland China set a record for June. According to World Panel, which was formerly known as Kantar, iPhone had the top three models in urban China, which is extraordinary. Also, if you look at the other products, Mac, iPad, and Watch, the majority of customers that are buying in China Mainland were new to the product. So lots of good things there. The other thing I would point out, which is an interesting point, is that the MacBook Air was the top-selling laptop model in all of China. The Mac Mini was the top-selling desktop model in all of China. So overall, a very positive quarter."
— Tim Cook, CEO
The company’s record installed base and leadership across device categories in China demonstrate enduring brand strength and customer loyalty, helping to offset macroeconomic and policy risks in the region.
Looking Ahead
Management guided for company-wide revenue to increase mid- to high single digits year over year in the fiscal fourth quarter ending September 30, 2025, with services growth expected to remain at a 13% year-over-year rate and gross margin forecast at 46% to 47%, including an estimated $1.1 billion tariff cost.
Capital expenditures are projected to rise substantially due to AI-related initiatives, and explicit U.S. supply chain investments now total $500 billion committed over the next four years. No concrete forward-looking metrics were provided for unit shipments or geographic segment performance.
