Apple revenue forecast surprised markets on Thursday, as the company projected higher-than-expected growth of up to 16% for the March quarter, driven by strong demand for iPhones and a sharp rebound in China alongside accelerating sales in India.

The outlook followed a strong holiday quarter that exceeded analyst estimates. Chief Executive Officer Tim Cook told Reuters that demand for the latest iPhones was “staggering,” highlighting robust consumer interest across major markets.

In addition, the iPhone 17 lineup lifted sales in the company’s fiscal first quarter, which ended on December 27. As a result, concerns about a possible slowdown in hardware sales eased. Apple shares initially rose 3.5% in extended trading before settling at a 0.8% gain.

Meanwhile, Apple expects revenue in its fiscal second quarter to grow between 13% and 16%. This compares with analysts’ expectations of around 10%, according to LSEG. The company also projected operating expenses of $18.4 billion to $18.7 billion, slightly higher than in the previous quarter.

However, the revenue outlook reflects ongoing processor supply constraints. During a conference call, Cook said iPhone production remains affected by limited chip availability. Taiwan-based TSMC continues to manufacture Apple’s processors. He added that balancing supply and demand remains difficult due to rising demand and reduced flexibility in the supply chain.

Before the call, Cook told Reuters that iPhone revenue rose 23% year on year, marking the company’s biggest quarter in history. He also said Apple gained market share in December.

At the same time, Apple forecast a gross margin of 48% to 49% for the second quarter. In the first quarter, gross margin reached 48.2%, beating both company guidance and analyst estimates. This suggests that rising costs for memory chips and commodities have not yet fully impacted results.

Still, Cook warned that the memory chip crunch could weigh more heavily on margins in coming quarters. He said pricing for memory continues to rise, driven partly by increased demand for artificial intelligence infrastructure.

Moreover, Samsung Electronics and SK Hynix, which control a large share of the DRAM market, have warned that smartphone and computer makers will bear the impact of worsening shortages. Nevertheless, Cook noted that iPhones gained market share over Android devices during the holiday season, which may help Apple manage supply pressures.

Meanwhile, iPhone revenue reached $85.27 billion in the first quarter, well above analyst expectations of $78.65 billion. Apple said sales records were set in every geographic region, despite broader economic uncertainty.

Analysts also pointed to the importance of services revenue in supporting margins. eMarketer analyst Jacob Bourne said that inflation and chip shortages could pressure hardware profits, making high-margin services more critical in the coming months.

Cook declined to comment on whether Apple may raise prices in response to higher component costs.

In terms of regional performance, Apple posted quarterly revenue of $143.8 billion, up 16% year on year and above estimates of $138.48 billion. Earnings per share came in at $2.84, compared with a consensus forecast of $2.67. The company’s installed base reached 2.5 billion devices.

Earlier this month, Apple announced a partnership with Google to integrate Gemini into Siri. The company also acquired AI startup Q.ai for $1.6 billion to enhance speech and emotion detection technologies.

Furthermore, sales in Greater China surged 38% to $25.53 billion, far exceeding expectations. Cook said the iPhone achieved record sales in the region and that the iPhone 17 drove strong user switching from Android devices.

However, the wearables, home, and accessories segment missed forecasts. Revenue in the category reached $11.49 billion, below the expected $12.04 billion. Cook said demand for the new AirPods Pro 3, which offer live translation features, exceeded internal projections.

Overall, Apple said its strong performance reflects broad-based demand across markets. Looking ahead, the company expects continued momentum, supported by resilient consumer interest and expanding services, as the Apple revenue forecast remains a key indicator of its growth trajectory.

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