Analysts caught flat-footed as iPhone supply, not demand, capped growth

Apple’s latest earnings report shattered Wall Street expectations, leaving analysts scrambling to recalibrate their forecasts in the wake of a performance that even the most bullish projections failed to anticipate. For the quarter ending December 27, 2025, the Cupertino giant announced a staggering $143.8 billion in revenue, marking a robust 16% increase year over year. Earnings per share soared to $2.84, while iPhone revenue alone climbed an impressive 23% to $85.3 billion. To cap it off, Apple projected March-quarter revenue growth of 13% to 16%, with gross margins expected to hover between 48% and 49%.

This wasn’t just a beat—it was a seismic shift in the narrative surrounding Apple’s growth trajectory. For months, the prevailing wisdom among analysts had been that demand for Apple’s flagship products was plateauing, and that the company’s best days of explosive growth were behind it. Instead, Apple delivered a masterclass in defying expectations, proving once again that its ecosystem remains as sticky and compelling as ever.

The iPhone 17 lineup, in particular, has emerged as a juggernaut. Early reports suggested that the new models—available in a vibrant array of colors including black, white, green, blue, and purple—have resonated deeply with consumers across demographics. Supply constraints, rather than waning demand, appear to be the primary bottleneck, with Apple struggling to keep up with the insatiable appetite for its latest devices. This marks a significant departure from the concerns that have dogged the company in recent years, where questions about innovation and market saturation loomed large.

Analysts are now grappling with a new reality: Apple’s growth is not only sustainable but accelerating. The company’s ability to consistently deliver cutting-edge hardware, coupled with its unparalleled ecosystem of services, has created a flywheel effect that shows no signs of slowing. From the seamless integration of hardware and software to the ever-expanding suite of services like Apple Music, iCloud, and Apple TV+, the company has built a moat that competitors are struggling to breach.

Regionally, Apple’s performance was broad-based, with strong growth across North America, Europe, and Asia. In China, a market that has been a source of concern for investors, Apple appears to have regained its footing, buoyed by the popularity of the iPhone 17 and the continued expansion of its services business. The company’s push into emerging markets, coupled with its focus on affordability through trade-in programs and financing options, has also paid dividends.

The supply chain challenges, while limiting in the short term, underscore the scale of Apple’s ambition. The company is reportedly grappling with shortages of key components, including advanced chips and displays, as it ramps up production to meet demand. This is a testament to the complexity and sophistication of Apple’s supply chain, which has been honed over decades to deliver products at an unprecedented scale.

Looking ahead, analysts are bullish on Apple’s prospects. The company’s pivot towards services, which now account for a significant portion of its revenue, provides a steady stream of recurring income that insulates it from the cyclicality of hardware sales. Meanwhile, its investments in emerging technologies like augmented reality, artificial intelligence, and autonomous systems hint at a future where Apple’s influence extends far beyond the devices we carry in our pockets.

In the aftermath of this earnings report, the conversation has shifted from whether Apple can sustain its growth to how high the ceiling truly is. With a war chest of over $100 billion in cash and a track record of disciplined capital allocation, Apple is well-positioned to weather any storm and capitalize on opportunities as they arise.

As the dust settles, one thing is clear: Apple has once again redefined what’s possible, leaving its competitors—and the analysts who cover them—playing catch-up. The question now is not whether Apple can continue to innovate, but how far its reach will extend in the years to come.

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