Apple Reports Record Revenue Despite Slowing iPhone Sales

Apple Inc. reported record quarterly revenue of $124.3 billion for its fiscal second quarter of 2026, beating Wall Street estimates despite iPhone unit sales declining 3% year-over-year. The results underscore the company's successful pivot toward services as its primary growth engine.

The Services segment — which includes the App Store, Apple Music, Apple TV+, iCloud, and Apple Pay — generated $26.8 billion in revenue, up 18% year-over-year and now accounting for 22% of total company revenue. Gross margins in the Services division reached 74.4%, significantly higher than the 36.8% hardware margin.

The Services Flywheel

Apple now has over 1.2 billion paid subscriptions across its services ecosystem, a figure that has nearly doubled in three years. CEO Tim Cook highlighted the growing installed base of active devices — now exceeding 2.3 billion — as the foundation for future services monetization.

Analysts see this shift as structurally positive for Apple's valuation. "Apple is increasingly being valued like a software company," said one equity analyst. "Services revenue is recurring, high-margin, and growing faster than the hardware business."