American telecommunications giant Apple Inc (ticker: AAPL) reported its earnings on the 30th of July after markets close and the story was familiar (by now) for most major tech stocks: despite delivering its strongest Q3 earnings ever, the market took 6% off the stock price anyway in the after-hours session. While Asian demand shows light bullishness, it’s uncertain if the sentiment is strong enough to transfer Stateside.

However, unlike other major tech companies, this isn’t necessarily a consequence of AI scepticism. It’s largely due to the other side of the AI coin: current institutional demand for AI.

As it stands, there’s plenty to cheer.

Trend Analysis

As of the nine months (9M) of its Fiscal Year (FY) 2026 ending September, the company’s top and bottom line have powered through most of the year with results not seen since the pandemic boom of 2021.

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Source: Company Information; Leverage Shares analysis

If trends continue, net sales will close FY2026 with 17% growth while EPS (earnings per share) will resonate with 22-23% growth as shown in the previous FY. Operating expenses have risen with some velocity and this is largely attributable to R&D expenses, which is trending towards a 25% increase over the previous FY.

Product sales are trending to close with an 18% growth over the previous FY while services – comprising of iCloud, Apple Pay, streaming, et al – come in second at 12% growth for the first time since 2021.

In the product and services suite the company has on offer, it is plainly evident what the root cause of this surge is: the iPhone 18.

Source: Company Information; Leverage Shares analysis

iPhone sales have practically met revenues accrued for the entire previous FY within nine months. If trends continue, iPhone sales will register a massive 25% increase over previous FY.

By no means is this a one-product story: practically every segment but for “Wearables, etc” registered strong growth over the past nine months. Even “wearables, etc” holding flat, however, is an improvement – given the past three FYs of decline.

When considering regions that Apple sells to, one stands out: “Greater China”, which includes the mainland, Hong Kong, and Taiwan.

Source: Company Information; Leverage Shares analysis

Going from the bear case for the past three FYs to an upside surprise, “Greater China” has already yielded more in sales in nine months than it did in the previous FY. If trends continue, this could translate to 25-27% growth in this market.

“Rest of Asia” – which includes India – is the next strongest region of growth trending at 18-19% growth. Apple reports that India – where a significant portion of its manufacturing once sited in China had moved to – reported that India was among its fastest-growing markets. Apple CEO Tim Cook stated, “We achieved June quarter revenue records in every geographic segment. We were pleased to see strength across the board with June quarter records in the U.S., Latin America, Western Europe, India, China mainland, Japan, and Southeast Asia”.

However, despite these results, Cook described the outlook for the rest of the year as one defined by “demand-driven shortage” – a turn of phrase that was contextualized in the earnings call.

How AI Led to a Shortage

Apple’s guidance for its Q4 2026 has decelerated to 9–11% growth, approximately 1% lower than consensus expectations. The Apple attributes that roughly half to foreign exchange (FX) volatility and half to worsening supply constraints on advanced process nodes for its own silicon.

Piled on top of that is the memory problem. With AI-relevant memory in massive demand and locking up supply from practically every manufacturer in the world has come spiralling memory prices. CFO Kevan Parekh stated that rising prices more than fully explains the sequential gross margin decline into the 47–48% guidance value. iPad and Mac prices have already risen, and the carry-in inventory cushion is now visible on the balance sheet and described explicitly as a diminishing offset. In other words, margins are going to get harder to maintain from here.

In what would be considered refreshing for sceptics of AI, Apple runs an asset-light AI posture that looks increasingly contrarian to its tech peers: while hyperscalers added hundreds of billions to spending, Apple’s 9M capex fell 28%. While this protects returns on capital, its recently-launched Siri AI compute rides on a hybrid of owned and rented capacity which can be considered as being monetized ambiguously through iCloud+ tiers. Thus, Apple’s AI offering is left dependent on partners and largely unlaunched in the EU and China – its two most sensitive markets.

Gauging the Market

The quality of Apple’s earnings beat is thinner than the headline suggests: approximately eleven cents of its Q3 2026 $2.02 EPS came from tariff refunds. Were they to be stripped, adjusted gross margin sits in line with expectations near 48% and EPS at $1.91 – which is roughly at par with the $1.89 consensus. The accuracy of the consensus is driven by the fact that the company has done predictably well throughout the past three quarters. As a result, analysts tagged its growth metrics accurately.

While Apple’s earnings wasn’t a surprise, the warnings of a shortage due to AI demand clogging up fabs worldwide worked against Apple – despite its (at best) steadfast and peripheral involvement in the AI Hype. The company’s products are simultaneously in demand and sold at a premium relative to the competition. If the premium widens due to availability issues, consumer preference for its products could shift and drive down the products’ momentum.

This is Tim Cook’s last call as CEO: while it’s a clean handoff on the numbers, it’s a very messy one on the constraints. John Ternus inherits record demand, a shrinking ability to satisfy it, a memory cost shock, and an AI feature that hasn’t yet proven it could drive upgrades by owners of past product releases. All put together, there are makings of a rough FY 2027 in the offing.

Professional investors in Europe might like to consider the +3x Long Apple ETP (AAP3) for magnified exposure during upticks of the stock’s trajectory while the -3x Short Apple ETP (AAPS) can be employed during downturns for magnified gains.

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