Initial Thoughts on Apple’s Strong 3Q25 Earnings
Hello everyone. Welcome to a special Friday edition of Above Avalon Daily. Apple reported 3Q25 earnings yesterday (Thursday). The results can be viewed here. Today's update will go over my initial thoughts on the release and earnings call. We will continue our discussion next week.
Have a great weekend.
Let's jump right into today's update.
Initial Thoughts on Apple’s Strong 3Q25 Earnings
Yesterday, Apple reported its strongest quarterly results in more than three years. Overall 3Q25 revenue was up 10%. We need to go back to 1Q22 for the last time Apple reported double-digit revenue growth (+11.2%). Results for iPhone and Mac were legitimately good. iPhone revenue was up 13% (strongest quarterly revenue growth since 4Q21) while Mac revenue was up 15% continuing what has been an upturn in the Mac business.
While the iPhone and Mac were the two Apple product categories that stood to see the greatest impact from a pull forward in demand related to tariff fears, Apple said such pull forward was not the primary driver for the strong quarterly performance. For iPhone, approximately 20% of 3Q25 revenue growth was attributed to pull forward. Overall, about 10% of Apple’s 3Q25 revenue growth was related to pull forward.
Apple also said iPhone channel inventory
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My Apple 3Q25 Earnings Estimates, Above Avalon Expectation Meters
Happy Wednesday.
A few quick housekeeping items.
Daily Updates Schedule. With Apple releasing earnings tomorrow (Thursday) after market close, the next update will go out on Friday.
Updated / Revised Financial Models. My updated Apple earnings model (works with Excel and Numbers) is now available to members with the Financial Models add-on attached to their Above Avalon Daily subscription. For those of you with the add-on, log into the Above Avalon payer portal (here). Once signed in, go to the "Digital Package" tab which will bring you to your personalized page where the model can be downloaded. In addition to the updated earnings model being available, my iPhone, iPad, and Apple Watch installed base models have also been updated ahead of Apple earnings. If you are interested in accessing these models, learn more about the Financial Models add-on by going to this page.
Let’s jump in.
My Apple 3Q25 Earnings Estimates
Here are my expectations for Apple’s key 3Q25 metrics:
Revenue: $89.9B (consensus is at $89.2B).
EPS: $1.47 (consensus is at $1.43).
iPhone revenue: $40.9B.
Services:
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Thoughts Heading Into Apple’s 3Q25 Earnings Release
Hello everyone. Apple reports earnings on Thursday. For today's update, we will begin to prepare for the earnings release.
Thoughts Heading Into Apple’s 3Q25 Earnings Release
As we will discuss in greater detail tomorrow, Apple’s 3Q25 results should be relatively fine. Revenue growth will likely be close to 2Q25 levels while margins may get dinged a little bit by tariffs. And yet, the numbers themselves probably won’t matter a whole lot. Instead, Apple finds itself stuck in mud on Wall Street. A growing list of headwinds have contributed to Apple shares experiencing some of their worst underperformance relative to peers and the market in recent memory.
While every other Big Tech company has moved notably higher from the tariff-induced lows of early April, Apple has barely participated.
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Alphabet 2Q25: By the Numbers, Alphabet Earnings Call Highlights, Overall Alphabet Takeaways
Hello everyone. Welcome to a new week. Apple will report earnings on Thursday. We will begin our earnings review tomorrow while also covering other news items and events. For today's update, we will continue our 2Q25 tech earnings reviews by going over Alphabet's earnings. Alphabet continues to be more of an Apple partner than competitor although the line between the two is blurred at times.
Let's jump in.
Alphabet 2Q25: By the Numbers
Overall, Alphabet’s 2Q25 revenue growth story was very much intact. Mid-teens growth with a little bit of FX headwind is not shabby at all. There may be a little bit of disappointment that margins aren’t improving alongside that double-digit revenue growth. Such concerns may be sticking around too as Alphabet’s depreciation expense continues to rise (tied to ballooning capex). We talked about that trend earlier in the month in the July 9th update available here.
Alphabet 2Q25 key numbers:
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Apple Unveils AppleCare One, Revisiting Apple Hardware as a Service, Crunching Some AppleCare One Numbers, ChatGPT Agent Follow-Up
Hello everyone. This update ended up taking a lot longer than expected to write. As you will see, the discussion goes over quite a few new financial / business assumptions involving AppleCare+ that needed some time to breathe in my head before publishing.
Given the lack of an update yesterday, today’s update will also be longer as we go into more in-depth on one story that originally was going to be published on Thursday.
Above Avalon Week-In-Review. A recap of analysis published elsewhere in the Above Avalon ecosystem this week.
The AVALON Podcast. Episode 8: “The Art of the iPhone Fold,” was dedicated to discussing foldables. After going over some smartphone history, we discuss how the smartphone operating environment is changing, growing rumors of a foldable iPhone and ultra thin iPhone, and how the two trends could be related. The discussion also revisited the iPad mini vs. phablet dilemma that Apple faced in the 2010s and lessons learned from that era that can be applicable to foldables. The episode included other discussion topics including Give Me A Break (one ridiculous item from this week) and Tell Me More (something that caught my attention this week). AVALON is a weekly audio podcast loosely modeled after Apple's Monday morning meetings. Bundle the podcast with this daily newsletter and receive 40% off AVALON pricing. To bundle the podcast with this newsletter, fill out out this form. The Podcasts add-on, which includes access to both AVALON and these updates in audio form, can also be bundled with this newsletter here.
Inside Orchard. “Ten Uncomfortable Truths in Tech.” There is A LOT of movement and change in tech. The essay includes ten observations on what's unfolding. Topics range from Elon Musk and Ray-Ban Meta glasses to the Mac and Robinhood. To bundle Inside Orchard with this newsletter, fill out this form.
Let's jump into today's update.
Apple Unveils AppleCare One
Relying on the same branding as Apple One for bundling various Apple subscriptions into one large subscription, Apple is bringing bundling to AppleCare+ with AppleCare One.
In a press release issued on Tuesday, here’s Apple:
“Apple today unveiled AppleCare One, a new way for customers to cover multiple Apple products with one simple plan. For just $19.99 per month, customers can protect up to three products in one plan, with the option to add more at any time for $5.99 per month for each device. With AppleCare One, customers receive one-stop service and support from Apple experts across all of the Apple products in their plan for simple, affordable peace of mind. Starting tomorrow, customers in the U.S. can sign up for AppleCare One directly on their iPhone, iPad, or Mac, or by visiting their nearest Apple Store.”
Some early reaction online to this unveiling went along the lines of: It was about time that Apple offering something like this. AppleCare+ became available as a monthly subscription in 2019.
While the comment may have been said in jest, there is truth found in the broader idea that Apple is under, not over, monetizing its installed base. Instead of milking users with subpar and inferior products and services, the key is to sell offerings that improve the user experience found with being in the Apple ecosystem. This AppleCare One bundle offering would seem to fit that description as an increasing number of Apple customers have more than two Apple devices.
Another common reaction online to this news has been
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ChatGPT Agent Doesn’t Cut It
Hello everyone. Happy Tuesday.
Today’s update may make some people deep in AI mania a little bit uncomfortable as it has to do with signs of trouble on the horizon. The latest example is found with OpenAI and AI agents. Let’s discuss.
ChatGPT Agent Doesn’t Cut It
Last week, OpenAI unveiled a general purpose AI agent.
Here’s TechCrunch:
“OpenAI is launching a new general purpose AI agent in ChatGPT, which the company says can complete a wide variety of computer-based tasks on behalf of users. OpenAI says the agent can automatically navigate a user’s calendar, generate editable presentations and slideshows, and run code.
The tool, called ChatGPT agent, combines several capabilities from OpenAI’s previous agentic tools, including Operator’s ability to click around on websites, as well as Deep Research’s ability to synthesize information from dozens of websites into a concise research report. OpenAI says users will be able to interact with the agent simply by prompting ChatGPT in natural language.
ChatGPT agent is rolling out on Thursday to subscribers to OpenAI’s Pro, Plus, and Team plans…
The launch of ChatGPT agent represents OpenAI’s boldest attempt yet to turn ChatGPT into an agentic product that can take actions and offload tasks for users, rather than just answering questions. In recent years, Silicon Valley companies including OpenAI, Google, and Perplexity have unveiled dozens of AI agents that have promised to do just that. However, these early version AI agents have proven to struggle with complex tasks, and they seem less compelling as products than the ultimate vision tech executives pitch around AI agents."
OpenAI told The Verge that agent is a result of the Operator and Deep Research teams being combined to produce a team of approximately two to three dozen people.
The basic idea on display here isn’t exactly new. Every prior attempt to figure out agents has led to dead ends, forgotten promises, and an overall yawn.
Not to bury the lede: This agent unveiling and launch was not good enough.
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Netflix 2Q25: By the Numbers, Netflix Earnings Call Highlights, Overall Netflix Takeaways
Happy Monday. Tech 2Q25 earnings season has arrived. Netflix reported last Thursday. We have a few earnings releases this week. Apple reports next week.
Given the influx of new Above Avalon Daily subscribers since the AVALON podcast launched (welcome!), it’s worth quickly going over my philosophy when it comes to covering earnings in these updates.
There is value found in staying abreast on the latest trends and developments in industries that Apple either currently plays in or may play in. The idea isn't to simply note industry norms and best practices but rather gauge potential openings and opportunities for the company.
We will kick off our earnings reviews with Netflix which offers a look at the paid streaming market. While not the largest video streamer (that award goes to YouTube), Netflix provides one of the purer looks at paid streaming.
Netflix 2Q25: By the Numbers
Netflix has longed wanted Wall Street to look at revenue (for gauging growth) and margins (for gauging profitability). Based on those two metrics, the Netflix story was very much intact in 2Q25 (April to June).
The company is growing its membership (helps revenue), pushing sizable price increases (helps revenue as long as churn remains measured), all while being more rational on the content spending versus the past (helps margins).
Revenue: $11.1B (+15.9% from 2Q24). Guidance for the current quarter (3Q25) points to a slight acceleration in revenue growth to 17.3%. Management cited new members, price increases, and increased ad revenue as growth drivers.
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Rivian Shifts to Google Maps, Uber Partnering With Lucid and Nuro on Autonomous Fleet, Tesla’s Awful 2Q25 Delivery Figures
Hello everyone.
We will wrap up the week in the automobile space.
Before we jump into today's update, a quick Above Avalon Weekly Recap - new analysis published this week elsewhere in the Above Avalon ecosystem.
The AVALON Podcast. Episode 7 – “Tim Cook’s Tim Cook Is Retiring” included approximately an hour-long discussion regarding Jeff Williams, the Apple COO transition, Apple CEO succession, and how all of these moving parts impact Apple product development. Additional podcast discussion topics included Robinhood and Apple’s Journal app. AVALON, my new weekly podcast loosely modeled after Apple's Monday morning meetings, is available via a standalone subscription. Bundle the podcast with this daily newsletter and receive 40% off AVALON pricing (just +$6/month or +$60/year). More information is available here.
Rivian Shifts to Google Maps
Here’s TechCrunch:
“For 18 months, Rivian and Google engineers worked together. Today, they’re showing off their work.
Rivian is pushing out a software update that will bring a unique version of Google Maps into its EVs. It’s the latest step in Rivian’s continued effort to distinguish its vehicles with software — an effort that has helped it strike up a joint venture with one of the world’s biggest automakers, Volkswagen.
This isn’t a typical Google Maps integration and it’s unlike the tech company’s other collaborations in the automotive sector. For years, Google has pushed into automotive through its smartphone projection app called Android Auto, as well as Google Built-In, an Android Automotive operating system that integrates Google services directly into the vehicle and is used by automakers like Volvo.
The collaboration with Rivian is neither. Instead, Rivian customers who use the in-car navigation will no longer see the Mapbox-based maps. Now, they’ll see Google Maps, but with a lot of Rivian DNA sprinkled on top, including its trip planner, user interface, and design, and EV charger locations, according to Rivian’s chief of software, Wassym Bensaid.”
This news didn’t receive too much attention as Rivian is a niche EV manufacturer (~130,000 vehicle sales to date). In addition, Rivian isn’t shifting from Apple to Google which would have led to a wave of sensational headlines. Instead, Rivian is moving from its own in-house mapping solution to a highly customizable Google Maps solution.
On some levels, this shift looks like Rivian coming up
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Apple TV+ Scores (Again) With Emmy Nominations, Apple TV+ Perception Is Changing, Netflix Losing Share in Video Streaming
Happy Wednesday.
We will keep this week’s discussion pace up by jumping straight into today’s update.
Apple TV+ Scores (Again) with Emmy Nominations
In a press release issued yesterday, here’s Apple:
“Apple TV+ today earned a record-breaking 81 Emmy Award nominations across 14 hit Apple Original titles for this year’s 77th Emmy Awards. Severance became this year’s most-nominated series with 27 nominations, and The Studio made history as the most-nominated freshman comedy series with 23 nominations in total. Additionally, with top program nominations for drama (Slow Horses) and comedy (Shrinking), Apple TV+ became the only network to have multiple titles nominated in the Outstanding Comedy and Drama Series categories. Apple also landed the most acting nominations of any network or studio this year, with 31 performance nods total.”
Apple has remained tight-lipped about Apple TV+ subscriber and revenue numbers. While there are some decent but not great ways of backing into OK estimates, we don’t have anything official from the company.
In terms of measurable data points, one thing we have for Apple TV+ is the number of Hollywood award nominations. Consider the past five year’s worth of Emmy nomination totals for Apple:
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NVIDIA Gets H20 Chip Permit for China, Revisiting Trump's Middle East Trip, Apple Places $500M Bet on American Rare Earth Magnets
Happy Tuesday. Let’s jump right into today’s update.
NVIDIA Gets H20 Chip Permit for China
Here’s the AP:
“Nvidia’s CEO Jensen Huang says the technology giant has won approval from the Trump administration to sell its advanced H20 computer chips used to develop artificial intelligence to China.
The news came in a company blog post late Monday and Huang also spoke about the coup on China’s state-run CGTN television network in remarks shown on X.
‘The U.S. government has assured Nvidia that licenses will be granted, and Nvidia hopes to start deliveries soon,’ the post said.
‘Today, I’m announcing that the U.S. government has approved for us filing licenses to start shipping H20s,’ Huang told reporters in Beijing. He noted that half of the world’s AI researchers are in China.
‘It’s so innovative and dynamic here in China that it’s really important that American companies are able to compete and serve the market here in China,’ he said.”
NVIDIA’s H20 chip, designed for inference tasks rather than training, is the most powerful chip that can be sold to China based on existing export controls. Based on the amount of order front-running conducted by Chinese firms in 1Q25, ahead of possible sales ban, the H20 chip is in high demand.
This is a good-sized win for NVIDIA. Huang appears to have played the back-and-forth political game very well. China represents about 15% of NVIDIA’s overall business which isn’t that much lower than the percentage that China represents of Apple’s business.
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Apple Seeking Formula 1 Media Rights, Apple Needs to Bet Big on Immersive Video, Factors in Apple’s Favor
Happy Monday. We will kick off a new week of updates with Apple reportedly being close to securing Formula 1 media rights. Let’s jump right in.
Apple Seeking Formula 1 Media Rights
In a report published on July 9th, here's the Financial Times:
“Apple is in talks to acquire the US rights to screen Formula 1 as the tech group chases the success of its hit movie based on the race car series and delves further into showing live sport.
The iPhone maker is challenging Disney’s ESPN — Formula 1’s current American broadcaster — when the broadcast contract becomes available next year, according to two people familiar with the discussions…
The race car series makes in the region of $85mn a year from its existing broadcast partner ESPN. F1 also streams live races on its own streaming service in the US, charging fans directly…
F1 is yet to make a decision on its future broadcasting arrangements and ESPN may yet retain the rights, according to a person with direct knowledge of the matter.
ESPN had an exclusive period of time to negotiate a deal without competition from other bidders. However, that window ended without a deal last year, opening the process to rivals. Other bidders are also expected to seek the rights.”
Back in 2022, Apple Studios secured what went on to be "F1 The Movie." The film required extensive collaboration between Formula 1 (F1) and Apple / productions crews. While that was going on, Apple had been rumored to also have an interest in bidding for F1 media rights. It was logical to assume that Apple thought highly enough of F1 to want to also play in their media rights.
There was a stretch in which Apple was no longer mentioned as a potential suitor for F1 media rights. That may not necessarily have been due to Apple losing interest, but rather shortcomings in reporting.
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Jeff Williams and the Apple Machine
Hello everyone.
Today’s update will serve as a wrap to our Jeff Williams / Sabih Khan / Apple COO transition discussion. On Tuesday, we went over my initial thoughts regarding Apple's announcement. Yesterday, we focused specifically on Apple CEO succession which has been thrust into the spotlight given the COO transition. For today's update, we will focus on Jeff Williams.
Weekly Above Avalon Recap. A few programming notes regarding new analysis published this week elsewhere in the Above Avalon ecosystem.
AVALON. This week’s AVALON podcast episode was focused on the App Store. The episode included a good 60 minutes on the current state of the App Store and what’s been going on with recent court rulings. For those of you who enjoy audio podcasts, AVALON is a perfect complement to this newsletter. To listen to episode 6: Bundle the AVALON podcast with this daily newsletter for just +$6/month (that’s 40% off regular pricing) by filling out this form. Want to get a feel for the podcast? Check out AVALON on X or on Threads for some sample clips from episodes.
Inside Orchard. Over at Above Avalon’s sibling site, my new essay, "It's Time to Double Down on Digital Mapping," was focused on digital mapping. During my recent vacation, shortcomings found with Apple Maps and Google Maps point to how we are likely undershooting in terms of mapping potential and promises. There is so much that isn't materializing. To read and listen to the essay: Bundle Inside Orchard with this newsletter for just +$5/month (that’s 50% off regular pricing) by filling out this form.
Let’s jump into today’s discussion.
Jeff Williams and the Apple Machine
Without the CEO title next to his name, Jeff Williams has never received the public recognition that he deserves when it comes to superior managerial capabilities and overall contributions to Apple spanning more than 20 years.
In the early years of Cook’s CEO era, Williams was actually given a decent press spotlight. For example, he sat down with Walt Mossberg at the 2015 Code Conference.
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More on Apple CEO Succession, Tim Cook on Apple CEO Succession, The Ideal Candidate for Apple CEO
Happy Wednesday. The plan is to stay on the Apple COO transition for the rest of this week. Today’s update will look more at Apple CEO succession. We will circle back to talk about Jeff Williams tomorrow.
Let’s jump right in.
More on Apple CEO Succession
There’s been a great deal of chatter about age when it comes to Apple CEO succession. Certain Apple executives seem to be talked up by some primarily because of their age while others, including Cook, are being penalized due to their age. On a certain level, focusing on age is not too surprising. It is true that average age of Apple’s senior ranks is higher now than it was a decade ago. Much of that is due to the lack of turnover at the top.
My view on age is that the topic is being elevated too much compared to where it should be in terms of a value-add Apple CEO succession dialogue. There is too much focus on age and not enough on the CEO role itself.
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Apple COO Jeff Williams to Retire, Revisiting Apple CEO Succession
Hello everyone. Today’s update will be dedicated to going over Apple’s COO transition. The news broke a few hours ago. We will likely have more to say about the topic tomorrow as well.
Apple COO Jeff Williams to Retire
Here’s Apple:
“Apple today announced Jeff Williams will transition his role as chief operating officer later this month to Sabih Khan, Apple’s senior vice president of Operations, as part of a long-planned succession. Williams will continue reporting to Apple CEO Tim Cook and overseeing Apple’s world-class design team and Apple Watch alongside the company’s Health initiatives. Apple’s design team will then transition to reporting directly to Cook after Williams retires late in the year…
‘Jeff and I have worked alongside each other for as long as I can remember, and Apple wouldn’t be what it is without him. He’s helped to create one of the most respected global supply chains in the world; launched Apple Watch and overseen its development; architected Apple’s health strategy; and led our world-class team of designers with great wisdom, heart, and dedication,’ said Tim Cook, Apple’s CEO. ‘I am and will always be beyond grateful for his numerous contributions to Apple over the years and his loyal friendship. Jeff’s true legacy can be seen in the amazing team he’s created and, while he’ll be greatly missed, he leaves the work of the future in incredible hands.’"
The entire press release made for an interesting read. Here's Williams:
“‘I have a deep love for Apple. Working with all of the amazing people at this company has been a privilege of a lifetime, and I can’t thank Tim enough for the opportunity, his inspirational leadership, and our friendship over the years...June marked my 27th anniversary with Apple, and my 40th in the industry. Beginning next year, I plan to spend more time with friends and family, including five grandchildren and counting. I’ve had the pleasure of working closely with Sabih for 27 years and I think he’s the most talented operations executive on the planet. I have tremendous confidence in Apple’s future under his leadership in this role.’”
Williams joined Apple in 1998 as head of worldwide procurement. While Cook was the unsung hero during the Jobs era, Williams was Tim Cook’s unsung hero. Appointed COO in December 2015, Williams spent the past decade overseeing the critical teams that kept the Apple machine running.
Over the years, Williams’ responsibility evolved to include:
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More on “F1 The Movie” Success, Capex vs. Depreciation, Keep an Eye on Big Tech Headcount
Happy Monday. We will kick off a new week of updates with some follow-up to topics that we discussed last week.
Let's jump right in.
More on “F1 The Movie” Success
In what probably shouldn’t have come as a complete surprise, some people aren’t happy about the way Apple's “F1 The Movie” is being talked up in terms of box office receipts. The film pulled in another $26M this past weekend in the U.S., bringing worldwide gross to $293M.
Over on a site called Cosmic Book News, Matt McGloin doesn’t understand why people are claiming “F1 The Movie” is a success given its budget and the estimated figure needed for the film to break even.
Here’s McGloin:
“Sure, it’s nice to see something original open for once, and which is also a crowd-pleaser (97% RT fan score), but at the end of the day, this isn’t about ‘artistic wins’ or ‘social media buzz.’ F1: The Movie needs to make money. And right now, it’s looking like it’s stuck in reverse.”
McGloin wasn’t alone in holding such an attitude as a few social media accounts made a similar point. Interestingly, a common theme to such criticism seems to be interest in the superhero film genre. It’s possible that some people are upset that an increasing number of superhero films are being labeled as flops or duds while “F1 The Movie" receives positive commentary and praise.
The point regarding “F1 The Movie” needing to pass a certain box office threshold to reach breakeven deserves follow-up.
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