Apple, Microsoft Crush Q1 Forecasts on AI, iPhone Boom

Apple kicked off its fiscal 2026 with a record $143.8 billion in revenue for the quarter ended December 27, 2025, up 16% year-over-year and topping estimates of $138.5 billion by 3.78%.[1][2][3] iPhone sales propelled the surge, generating $85.27 billion—up 23.3% from $69.14 billion last year and the product's best quarter ever, accounting for 59.3% of total sales.[1][3] CEO Tim Cook hailed it as a 'remarkable, record-breaking quarter' fueled by 'unprecedented demand' across all regions, including a 38% jump in Greater China to $25.53 billion.[1][2][5] Services revenue hit an all-time high of $30.01 billion, rising 14% year-over-year with double-digit growth in advertising, cloud, music, payments, and the App Store.[1][2][3] The segment's 76.5% gross margin bolstered net income to $42 billion, up from $36 billion, and diluted earnings per share to $2.84, a 19% increase.[2][3] Apple generated nearly $54 billion in operating cash flow, returning $32 billion to shareholders via buybacks and dividends, including $24.7 billion in repurchases, while keeping capital expenditures low at $2.37 billion.[1][2] Microsoft's Q2 results, reported alongside Apple's, showed $81.27 billion in revenue, up 16.7% year-over-year.[1] Azure cloud growth accelerated 39% and Microsoft Cloud revenue crossed $51.50 billion for the first time, with Intelligent Cloud at $32.91 billion, up 29%.[1] CEO Satya Nadella emphasized the company's massive AI business, backed by a $625 billion commercial performance obligation and a 27% stake in OpenAI valued at $135 billion.[1] Microsoft's aggressive AI push came at a cost: capital expenditures soared 89% to $29.88 billion, contrasting Apple's asset-light model.[1] While Apple leverages its 2.5 billion active device base for services monetization, Microsoft invests heavily in infrastructure to dominate AI.[1] Both strategies paid off, with iPhone 17 demand and cloud expansion driving outperformance.[1][4] The earnings lit a fire under stocks, reinforcing tech's resilience despite economic headwinds. Apple's hardware wins in iPad ($8.6 billion, up 6.3%) offset dips in Mac ($8.39 billion, down 6.7%) and wearables ($11.49 billion, down 2.2%).[3] Looking ahead, Apple forecasts Q2 revenue growth of 13-16%, led by services.[4]