Prime Highlights: 

Apple achieved a record gross margin of 46.9% in its fiscal Q1 2025, surpassing the previous high of 46.6% set in March 2024. 

Apple’s services segment, which includes App Store purchases, advertising, and AppleCare, rose 4% to $26.34 billion, now accounting for 21% of total revenue. 

Key Background: 

Apple’s fiscal first-quarter earnings for 2025 reveal a record-high gross margin of 46.9%, surpassing the previous record of 46.6% set in March 2024. This growth is primarily driven by the company’s expanding services business, which now includes offerings such as App Store purchases, advertising, payments, and AppleCare support. 

Despite a slight decline of nearly 1% in iPhone sales compared to the previous year, Apple experienced a notable rise in overall revenue, reaching $124.3 billion—an increase of nearly 4%. The services sector, in particular, showed impressive performance, growing 4% to generate $26.34 billion, exceeding analyst expectations. This segment now accounts for approximately 21% of the company’s total revenue, a significant contributor to Apple’s bottom line as the iPhone market matures. 

Apple’s Chief Financial Officer, Kevan Parekh, highlighted the positive impact of the services business on the company’s overall profitability, noting its role in improving margins. Services are now viewed as a crucial component of Apple’s long-term growth strategy, offsetting the slower growth in iPhone sales, particularly in markets such as Greater China. 

Looking ahead, Apple anticipates its gross margin for the current quarter to fall between 46.5% and 47.5%, maintaining its strong financial position. Apple’s shift towards services, coupled with its robust device portfolio, has reshaped Wall Street’s perception of the company. Once known primarily for its hardware, Apple is now recognized for its ability to generate substantial profits from digital services, leading to continued investor confidence. 

As a result, Apple’s stock rose over 3% in after-hours trading following the earnings report, further fueling its market capitalization, which now stands at $3.6 trillion. The company’s growing services revenue and strategic pivot to high-margin offerings like digital services are positioning it for sustained success in the coming years.