Apple Q2 FY26: Revenue +17% to $111B on iPhone Pro strength; R&D +34%; new AI risks disclosed

Apple appealed the contempt finding and on December 11, 2025, the Ninth Circuit partially upheld the injunction but modified it to allow Apple to charge commissions on link-out purchases and require parity in presentation between in-app and external purchase options. The baseline disclosed referral for potential criminal contempt proceedings; the current filing does not mention this referral's outcome.

The baseline stated Apple "plans to appeal" and noted the order remains effective pending appeal unless stayed. The current filing confirms the appeal has been filed ("has appealed") and removes the stay/effectiveness language, indicating the appeal is now active.

The current filing adds a new Note 9 disclosure of unconditional purchase obligations totaling $27.7 billion, covering supplier arrangements, distribution rights, and licensed intellectual property and content. This disclosure was not present in the baseline's Note 9, which addressed only contingencies.

Q2 FY26 total net sales reached $111.2B, up 17% YoY from $95.4B in Q2 FY25. Prior-year Q2 FY25 grew only 5% YoY from $90.8B. The acceleration reflects stronger iPhone Pro demand and Services growth across all segments.

Greater China net sales surged 28% YoY to $20.5B in Q2 FY26, reversing the prior-year 2% decline. The turnaround is attributed to higher iPhone sales and favorable renminbi FX. Six-month Greater China revenue is up 33% YoY.

iPhone revenue grew to $57.0B in Q2 FY26, driven by higher Pro model sales. Prior-year Q2 FY25 iPhone grew only 2% YoY. The acceleration reflects strong Pro-tier demand globally, particularly in Greater China.

Products gross margin percentage expanded to 38.7% in Q2 FY26 from 35.9% in Q2 FY25, driven by favorable product mix (Pro models) and FX tailwinds, partially offset by higher costs. Prior-year Q2 FY25 margin contracted 70 bps YoY.

R&D expense jumped 34% YoY to $11.4B in Q2 FY26, driven by higher infrastructure-related costs and headcount. Six-month R&D is up 33% YoY to $0.0M. The acceleration reflects intensified AI/compute investment.

Effective tax rate rose to 17.5% in Q2 FY26 from 15.5% in Q2 FY25, primarily due to changes in unrecognized tax benefits and a valuation allowance change. Six-month rate is 17.5% vs. 15.0% prior year.

Manufacturing purchase obligations increased to $44.6B as of March 28, 2026, up from $38.4B a year earlier. The $6.2B increase reflects higher component commitments, consistent with stronger demand and supply-chain positioning.

Remaining buyback authorization increased to $63.8B as of March 28, 2026, from $37.0B a year earlier. The Board authorized an additional $100B program on April 30, 2026 (vs. $100B on May 1, 2025), offsetting $37.0B in program repurchases during the six months.

Quarterly dividend increased to $0.27 per share (effective Q3 FY26) from $0.26, a 3.8% increase. Prior-year increase was from $0.25 to $0.26 (4.0%). The company continues annual dividend growth.

Current filing adds explicit disclosure of supply constraints and rising component costs (semiconductors, NAND, DRAM), stating the company "expects these trends to intensify" and warning of material adverse effects on demand, revenue, costs, and gross margin. Baseline contained only generic macro language.

Current filing reports that Section 232 semiconductor investigation initial results were published January 14, 2026, and did NOT impose additional tariffs on Apple's products. Baseline only noted the investigation was initiated. This is a positive development — no new tariffs from this probe.

Current filing discloses a February 20, 2026 Supreme Court ruling that struck down certain tariffs under IEEPA. Apple is applying for a refund of tariffs paid. This is new information not present in the baseline and represents a potential cash recovery.

Current filing adds specific reference to Section 122 tariffs (Trade Act of 1974) and enumerates potential future measures (Section 232 semiconductors, Section 301 actions). Baseline used generic "modifications and delays" language. The current disclosure is more detailed about the legal authorities and potential scope.

Current filing discloses Apple paid the remaining $8.8B deemed repatriation tax balance during the first six months of FY26, completing the TCJA obligation. This was not mentioned in the baseline and represents a significant cash outflow now complete.

Current filing adds a new "Other Purchase Obligations" section disclosing $30.4B in noncancelable obligations (supplier arrangements, IP/content licenses, distribution rights, capital assets), with $9.3B due within 12 months. Baseline did not separately disclose this category.

Current filing lists MacBook Neo™ as a new product announced in Q2 FY26. This product did not appear in the baseline's Q2 FY25 product list and represents a new product line introduction.

Current filing adds a new Note 5 table disclosing intangible assets, showing gross intangibles increased from $25.0B (Sep 2025) to $37.8B (Mar 2026), with net non-current intangibles rising from $11.1B to $21.3B. Baseline filing did not break out intangible assets separately in Note 5. The $12.8B increase in gross intangibles over six months suggests a significant acquisition or licensing transaction.

Q2 R&D expense increased from $8.6B (Q2 FY25) to $11.4B (Q2 FY26), up 33%. Six-month R&D rose from $16.8B to $22.3B, up 33%. The dollar increase ($2.9B in the quarter, $5.5B year-to-date) is substantial and reflects intensified investment in product development.

Six-month share repurchases declined from $49.5B (H1 FY25) to $37.0B (H1 FY26), down $12.5B or 25%. The company repurchased 135 million shares in H1 FY26 vs. 208 million in H1 FY25. Buyback pace has slowed materially.

Current filing adds a new Note 9 table disclosing $27.7B in unconditional purchase obligations over the next four-plus years, primarily for supplier arrangements, distribution rights, and licensed IP/content. Baseline filing did not disclose this schedule. The disclosure provides visibility into multi-year commitments.

Current filing restructures Note 10 segment disclosure into a matrix format showing cost of sales, R&D, selling/marketing, and G&A by segment (with R&D and G&A allocated to Corporate). Baseline filing presented net sales and operating income only for each segment, with a separate reconciliation table. The new format provides more granular visibility into segment-level cost structure.

Current filing adds disclosure of a single customer representing 17% of trade receivables (12% at Sep 2025 fiscal year-end). Cellular carriers' share of trade receivables declined from 37% (Mar 2025) to 30% (Mar 2026), suggesting a shift in customer mix or payment timing.

Apple added a standalone AI risk factor covering legal, regulatory, ethical, and operational risks from integrating AI into products and operations. The disclosure lists specific risk areas including product liability, IP infringement, data privacy, cybersecurity, harmful content exposure, bias, and online safety. This reflects the company's expanding AI feature rollout and acknowledges that despite responsible-development commitments, not all issues may be identified before deployment.

Apple expanded its cybersecurity risk factor to include AI-enabled attack vectors—targeted phishing, automated vulnerability discovery, deepfake authentication bypass, and accelerated exploitation. The disclosure notes that AI models themselves can be vulnerable and that AI deployment by Apple and suppliers creates additional attack surfaces. This update reflects the evolving threat landscape as AI tools become widely available to adversaries.

Apple added language to its product-defect risk factor acknowledging that AI features increase safety risks, including exposure to harmful, inaccurate, or negative content. This ties AI-specific safety concerns to the broader product-liability and quality-control framework, signaling that AI features carry distinct user-harm risks beyond traditional hardware/software defects.

Apple updated its data-privacy risk factor to note that AI features increase the risk of inadvertent personal-data disclosure. This acknowledges that AI processing—potentially involving large-scale data ingestion, model training, or inference—creates additional privacy exposure beyond traditional data-handling workflows.

Apple added disclosure on emerging online-safety laws, including minor-protection and age-verification mandates. The company notes these requirements may force product/service modifications, increase compliance costs, create operational disruptions, and heighten privacy/security risks. This reflects the global regulatory trend toward stricter child-safety and age-gating rules for digital platforms.

Apple updated its antitrust risk factor with the timeline of the Google search case: liability finding in August 2024, remedies order in September 2025, and ongoing appeals by both DOJ and Google. The disclosure notes that if DOJ's proposed remedies (prohibiting Google from offering commercial search-distribution terms) are ultimately imposed, Apple's licensing revenue from Google could be materially affected. This provides concrete dates and procedural status for a previously-disclosed risk.