The Fruity Cargo Cult Apple has just posted a monster iPhone quarter, helped by holiday spending and a China bounce that makes the numbers look lovely on a spreadsheet.
iPhone revenue jumped 23 per cent year on year in the three months to the end of December, with overall revenue up 16 per cent to a record $144bn, well ahead of its 10 to 12 per cent guidance.
Job’s Mob said China sales climbed 38 per cent year on year and it booked $42bn in net income, which is the sort of figure that makes accountants reach for a stronger coffee.
Apple chief executive Tim Cook said “a remarkable, record-breaking quarter was driven by unprecedented iPhone demand, with all-time records across every geographic segment”.
Even so, the market reaction was hardly euphoric, with the cocaine nose jobs of Wall Street worrying about how long the iPhone sugar rush will last, what rising costs will do, and whether its AI plan is still a series of false starts.
Shares rose less than one per cent after hours, despite being up 22 per cent in the past six months, helped by solid hardware sales and a tariff hit that turned out less nasty than feared.
Apple chief financial officer Kevan Parekh attributed the momentum in China to upgrades and switchers, with the iPhone 17 launch playing a key role. “It really comes down to the reception of the product line-up… the iPhone 17 family has seen a huge amount of enthusiasm, and that’s really the driver of performance.”
The China rebound follows two years of messy trading as Job’s Mob fought local competition, including Huawei, while facing a government pushback against its devices.
It forecast current-quarter revenue growth of 13-16 per cent year on year, again above the cocaine nose jobs of Wall Street expectations of 10 per cent, but the longer-term grumbles did not go away.
Deepwater Asset Management analyst Gene Munster said, “I think that investors still have this nagging question of: Is this company going to be successful in AI? It’s still a ‘show me the money’ question. They are so gun-shy… given the debacle of last year.”
Cook warned that memory chip costs would likely rise in the current quarter, then refused to be drawn on what would happen beyond March.
A shortage is building because a small club of suppliers can make the high-end memory needed in AI data centres, squeezing the more ordinary stuff used in consumer devices.
Analysts at Morgan Stanley and Jefferies expect a roughly $100 iPhone 18 price rise later this year, but Cook said he would not “speculate” on price rises.
Job’s Mob tried to calm nerves by saying gross margins should stay stable or improve in the first three months of 2026, after posting 48.2 per cent last quarter.
It is still playing catch-up as rivals pile hundreds of billions into AI models, chips and data centres, while Job’s Mob has mostly watched from the sidelines.
After a run of departures from its AI team, it said it would increase AI research spending, with R&D at $10.8bn for the quarter, up 31 per cent year on year.
It announced a deal this month to use Google’s Gemini models for iPhone features and to improve Siri, alongside its existing relationship with OpenAI.
Earlier the same day, Job’s Mob said it had bought Israeli start-up Q.AI for close to $2bn, as it tries to elbow into wearable AI devices, with the start-up working on facial expression analysis for “silent speech”.
Services revenue hit a record $30bn as the high-margin unit, including the App Store, Apple Pay, and iCloud, continued to grow, while the company’s biggest challenge remains persuading people to pay again for a slightly shinier rectangle.
