Apple's Q3 2025 10-Q: iPhone and Services Drive Profitability

Apple recently filed its quarterly report (Form 10-Q) for the period ending June 28, 2025, and the numbers offer a detailed look into the health of the world's most valuable technology company. By digging into the income statement, we can see not just how much money Apple made, but where that money came from, what it cost to generate, and what the key trends are shaping its future.

For the third fiscal quarter, Apple reported a strong performance, with total net sales climbing 10% year-over-year to $94.0 billion. This growth powered a 9% increase in net income, which reached an impressive $23.4 billion. Let's break down how the tech giant achieved these results.

To visualize how Apple's revenue is generated and what costs are incurred to arrive at its final profit, the flow diagram below illustrates the company's income statement for the quarter.

The iPhone and Services Engines Roar Ahead

The primary drivers of Apple's growth this quarter were its two largest segments: iPhone and Services.

• iPhone: Sales for Apple's flagship product jumped 13% to $44.6 billion. The filing specifies that this was "due to higher net sales of Pro models," indicating strong demand for its premium offerings.
• Services: This segment, which includes the App Store, Apple Music, iCloud, and advertising, continued its impressive trajectory, growing 13% to $27.4 billion.

This dual-engine growth is crucial. While the iPhone remains the core revenue generator, the Services business is becoming a powerhouse of profitability. However, not all product categories shared in the success. Sales for iPad and the Wearables, Home and Accessories division (which includes Apple Watch and AirPods) declined by 8% and 9%, respectively.

A Story of Shifting Margins

A key insight from the report lies in Apple's profitability, or gross margin—the amount of profit made on sales after accounting for the cost of the goods sold.

Apple's overall gross margin percentage was strong at 46.5%. The interesting part is the story behind this number:

• Services Gross Margin: This increased to an impressive 75.6%, up from 74.0% last year. This is a very high-margin business.
• Products Gross Margin: This slightly decreased to 34.5% from 35.3%.

This trend highlights a core part of Apple's strategy. As the high-margin Services division grows faster than the Products division, it helps lift the company's overall profitability, even if margins on physical hardware face pressure. This quarter, Services accounted for nearly half of Apple's total gross profit ($20.7 billion out of $43.7 billion).

Global Strength and Shareholder Returns

Geographically, Apple saw sales growth across all its regions for the quarter, a sign of broad-based global demand. The "Rest of Asia Pacific" region was a standout, with 20% growth. Even Greater China, which has faced headwinds, posted a 4% sales increase for the quarter, a positive turn compared to its performance over the last nine months.

Finally, Apple continued its massive capital return program, a key reason many investors hold the stock. In the quarter, the company spent $21.2 billion repurchasing its own shares and paid out $3.9 billion in dividends, demonstrating immense financial strength and a commitment to its shareholders.

In conclusion, Apple's Q3 2025 filing paints a picture of a company firing on its most important cylinders. The continued dominance of the high-end iPhone and the relentless growth of the high-margin Services business are more than compensating for softness in other product areas. While the company still faces challenges, including ongoing legal proceedings like a lawsuit from the Department of Justice, its core financial performance remains exceptionally strong.