Apple today announced financial results for the fourth fiscal quarter of 2024, which corresponds to the third calendar quarter of the year.
For the quarter, Apple posted revenue of $94.9 billion and net quarterly profit of $14.7 billion, or $0.97 per diluted share, compared to revenue of $89.5 billion and net quarterly profit of $23.0 bi llion, or $1.46 per diluted share, in the year-ago quarter.
While revenue was up 6 percent year-over-year, Apple's profits were hit hard by a one-time charge of $10.2 billion over tax issues in the European Union. Without that one-time charge, Apple's profits would have been $1.64 per share, up 12 percent year-over-year.
Gross margin for the quarter was 46.2 percent, compared to 45.2 percent in the year-ago quarter. Apple also declared a quarterly dividend payment of $0.25 per share, payable on November 14 to shareholders of record as of November 11.
For the full fiscal year, Apple recorded $391.0 billion in sales and $93.7 billion in net income, compared to $383.3 billion in sales and $97.0 billion in net income for fiscal 2023.
"Today Apple is reporting a new September quarter revenue record of $94.9 billion, up 6 percent from a year ago," said Tim Cook, Apple's CEO. "During the quarter, we were excited to announce our best products yet, with the all-new iPhone 16 lineup, Apple Watch Series 10, AirPods 4, and remarkable features for hearing health and sleep apnea detection. And this week, we released our first set of features for Apple Intelligence, which sets a new standard for privacy in AI and supercharges our lineup heading into the holiday season."
As has been the case for over four years now, Apple is once again not issuing guidance for the current quarter ending in December.
Conference call recap ahead...
1:42 pm: After declining around 1.8% in regular trading today amid broader tech declines, Apple's stock is currently down another 1% in after-hours trading following the earnings release.
1:43 pm: While Apple's revenue set a September record, the one-time charge related to the tax case in the European Union resulted in a $10.2 billion hit to Apple's profit numbers.
1:45 pm: Services revenue set an all-time record at just shy of $25 billion for the quarter, pushing total fiscal 2024 revenue in that segment to over $96 billion.
1:47 pm: Outgoing CFO Luca Maestri notes that Apple drove nearly $27 billion in operating cash flow during the quarter as Apple returned over $29 billion to shareholders. He also said Apple's active installed base of devices has hit all-time highs across all products and geographic segments.
1:59 pm: The earnings call with analysts should begin at the top of the hour or... right about now.
2:01 pm: The call begins with the standard warnings about forward-looking statements from investor relations chief Suhasini Chandramouli.
2:02 pm: Noteworthy in this quarter is Apple's publishing of both GAAP and non-GAAP numbers, to show what Apple's earnings look like both with and excluding a greater than $10 billion one-time charge related to an EU tax charge.
2:04 pm: Tim Cook begins the call by touting Apple's $94.9 billion in revenue as a September-quarter record, up 6% from last year. It also set an all-time record for Services in September, up 12 percent year over year. It also set new records for the September quarter in Americas, Europe, and a number of other countries.
2:04 pm: He goes on to note that the last year was "an extraordinary one" for Apple, mentioning the Apple Vision Pro launch, Apple Intelligence, and more. He says that more updates to Apple Intelligence will come soon, on top of what launched in iOS 18.1 earlier in October. "This is just the beginning."
2:05 pm: iPhone revenue set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment.
2:06 pm: Mac revenue was $7.7 million, up 2% from a year ago. As the quarter ended a month ago, the new Macs introduced this week are not included in this total, but back-to-school sales are.
2:07 pm: The iPad came in at $7 billion, up 8% year over year, and around $700 million behind the Mac. iPad Air was popular with students and teachers, "while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro."
2:08 pm: Wearables, Home and Accessories sales reached $9 billion, down 3% from last year. In September, Apple launched the Apple Watch Series 10.
2:08 pm: AirPods 4, available with Active Noise Cancellation, came out as well, as did end-to-end hearing health capabilities for AirPods Pro 2. "We believe this will make a meaningful difference in users' lives."
2:09 pm: Services set a new all-time record with $25 billion in revenue, up 12% from a year ago, with all-time revenue records across most categories.
2:11 pm: Cook notes the live sports experiences Apple offers with MLS Season Pass and MLB on Fridays. Also, it's the 10th anniversary of Apple Pay. He also notes that users will soon be able to redeem rewards and access loans from credit cards, debit cards, and other lenders at checkout.
2:11 pm: Two new retail stores opened during the quarter, and four new stores are coming to India.
2:12 pm: "We're proud of the progress we've made to be carbon neutral across our entire footprint by the end of the decade... we were thrilled to introduce our first-ever carbon neutral Mac with the latest Mac mini. Customers can also choose a carbon neutral option of any Apple Watch... We are determined to reach our 2030 goal."
2:13 pm: "As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come."
2:14 pm: "With Luca transitioning to a new role with Apple, this will be the final time he's joining our call. I wanted to take a moment to recognize his extraordinary service as Apple CFO, and to thank him for his partnership. I am deeply grateful for his 10 years in the role. Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from."
2:15 pm: Luca: "Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community."
"[Incoming CFO Kevin Parekh] is exceptional, and I know you will enjoy interacting with him going forward."
2:15 pm: Luca goes on to the quarter, revealing that the installed base of active devices reached an al-time high across all products and geographic segments. Services had strong strength around the world, reaching all-time records in both developed and emerging markets.
2:17 pm: Company gross margin was 46.2% (at the high end of its prediction range). Products gross margin was 36.3%, up 100bp sequentially. Services gross margin was 74%, unchanged from the prior quarter. Net income was $25 billion, except for a $10.2 billion charge that brought net income down to $14.8 billion reported for the quarter.
2:17 pm: Many iPhone models were among the top-selling smartphones around the world. According to a Cantar survey, iPhone was the top-selling model in the US, urban China, the UK, Australia and Japan. Customer Satisfaction for iPhone 15 family measured at 98% in the US.
2:18 pm: About half of customers in the quarter were new to the Mac, and Mac customer satisfaction was 95% in the US according to 451 Research. iPad saw strong performance in emerging markets, with double-digit growth in Mexico, Middle East, India and South Asia. Over half of customers who purchased iPad were new to the product.
2:19 pm: Apple Watch also reached a new high for installed base, with more than half of customers purchasing a watch during the quarter were new to the customer. Customer sat is 96% in the US according to 451 Research.
2:19 pm: Services growth grew 12%, with the active base of devices "setting a solid foundation for the future expansion of our ecosystem."
2:19 pm: Paid accounts and paid subscriptions grew double digits year over year, more than double the number of paid subs four years ago.
2:20 pm: Apple Card just celebrated its fifth anniversary, and was ranked number one in customer satisfaction by JD Power for the fourth year in a row.
2:21 pm: Nvidia just launched a Mac As A Choice program, with more than 10,000 Macs deployed worldwide. Novartis recently chose iPhone 16 as the standard mobile device for all employees. "We see continued momentum for Apple Vision Pro in the enterprise." UCSan Diego Health is testing spatial computing apps in clinical trials for patient surgery in the operating room.
2:23 pm: Apple has net cash of $50 billion, and returned $29 billion to shareholders in the quarter.
Apple expects total company revenue to grow low-to-mid single digits in the next quarter year over year, with gross margin between 46 and 47%, with an OpEx of between $15.3 and $15.5 billion. A $0.25/share cash dividend will go out later this month.
2:23 pm: The Q&A with analysts is beginning.
2:26 pm: Q: Can you expand a bit on the feedback to Apple Intelligence, both for iOS 18.1 and the developer beta, and do you attribute the strong iPhone performance to Apple Intelligence?
A: As I noted in my comments, just this week on Monday, we made the first set of Apple Intelligence features available for US English for iPhone, iPad and Mac. Systemwide writing tools, a more natural conversational Siri, more intelligent Photos app, and the ability to create movies by typing a description. Also notification summaries and priority messages, email summaries and email priority.
We're getting a lot of positive feedback from developers and customers, and if you look at the first three days, which is all we have, 18.1 adoption is twice as fast as the 17.1 adoption was in the year-ago quarter. There's definitely interest out there for Apple Intelligence. We are looking forward to bringing even more features in December, including even more powerful writing tools and visual intelligence experience that builds on Apple Intelligence, and ChatGPT integration in addition to other features, as well as localized English to include the UK, Australia and Canada. It'll be quite the software quarter between the release on Monday and the release in December. As we turn the corner to 2025, we'll have more languages and more features rolling out starting in April. It's a very strong drumbeat and we couldn't be more excited about it.
2:27 pm: Q: Luca, congratulations on the new role. It's been a real privilege being able to spend some time with you. Could you talk a bit about the CapEx outlook and whether investments in things like private cloud compute could change the historical capex range of roughly $10 billion a year?
A: We have a bit of a hybrid model in the way we run our data centers. In some cases we use our own data centers, in some cases we use third-party providers. So our CapEx numbers may not be fully comparable with others. But obviously we are rolling out these features, Apple Intelligence features, now. So we are making all the capacity needed available for these features. You will see in the 10-K, the amount of CapEx we've incurred during Fiscal 24, and in Fiscal 25 we will continue to make all the investments that are necessary. Investments in AI-related CapEx will be made.
2:30 pm: Q: In the last four years, you've exited with the iPhone demand outpacing supply. Can you give an early read of iPhone cycle demand to past years? There are no known supply shortages. Any impact that Apple Intelligence is having on iPhone 16 sales?
A: We believe Apple Intelligence is a compelling upgrade reason, but we just launched it three days ago, so what we have now is the number I just referenced, that 18.1 has twice the upgrade rate as 17.1. In terms of exiting the December quarter with demand greater than supply, I don't remember that in all four years, we clearly had cases during Covid where there were disruptions and they spilled over. But in a more regular environment where we don't have a 100-year flood kind of thing, our desire is to get into balance as quickly as possible. We don't want customers to have to wait for products. If you look at how we've done this year, we've done that very quickly with the 16, and on the 16 Pro and Pro Max we've been constrained in October. That's a function of supply and demand, not one side or another. We believe we'll be out of constraint soon and that's a good sign from our point of view. We've been preparing for the quarter for a while.
2:32 pm: Q: It's been a pleasure working with you Luca and we wish you the best going forward. There's been a lot of debate in the market right now about input costs and commodity prices, and the impact of that re gross margins. Can you help us understand your view of component prices and whether you see those as tailwinds to gross margins or whether that should become a headwind going forward?
A: As you know, gross margin is a factor of many variables, but commodities are important. For September quarter and what we expect for December, most commodities are going to move down in price while NAND and DRAM increased during Sept. quarter and we expect them to increase during the Dec. quarter. We are very pleased with the levels of gross margin we've reported during the entire year of Fiscal 24, they're really record levels of gross margin and guiding to 46-47% for December, with a lot of new products across the board, I think it's a very good sign.
2:34 pm: Q: With regard to iPhone and the fourth calendar quarter, when you look at mid-to-low single-digit revenue growth, do you expect the iPhone to grow faster and what are you thinking in China which keeps improving each quarter?
A: We are not providing that level of color today, yes we said that we expect company revenue to grow low-to-mid single digits. Apple Intelligence is rolling out over time, features and languages. We had exciting launches this week, so we'll leave it at that. We've given you the total for the company and some pretty good direction on Services, which we expect to continue to grow at a similar rate to fiscal 24.
2:36 pm: Q: You guys are well aware, a lot of the noise, people chattering about build and lead times. You guys are guiding to single digit growth, but you have a lot of perspective now, Tim. What are people missing here? It sounds like you guys are conservative and guiding for revenue but it sounds like the sky is certainly not falling and you have a good product cycle. What are people missing and what are you excited about?
A: I could not be more excited about Apple Intelligence and the rollout in front of us. I'm on future releases and working on it is changing my daily life. I'm super excited about the health features that we're rolling out. The number of emails I'm already getting from customers that have taken a hearing test and are using their AirPods Pro 2 as a hearing aid are staggering and heartwarming to read. I'm also thrilled about sleep apnea and notifications there that we'll have through the watch. This week is a very exciting week for us because we just rolled out three days, three launches of different Macs and desktops, and so we have a lot of things on the docket. It's definitely the strongest lineup we've ever had going into the holiday season.
In terms of the noise, I tune it out, because if not, it would be deafening. That's what I do. I can't speak for everybody else. That's what I do.
2:38 pm: Q: On Services, you're at $100 billion run rate today, as you look at the portfolio, how much is recurring versus transactional, and are the growth rates different between subscription portfolio and transactional?
A: We have a very diversified portfolio of services, and over the years, the amount of recurring has grown. It's growing faster than the transactional piece. We have more than a billion paid subscriptions on the platform right now between our services and third-party services. We feel very, very good and to your question, yes, the recurring portion is growing faster than the transactional one.
2:41 pm: Q: If I look at growth rates, there's a lot of concern around China about iPhone demand. The performance in China looks really good. Could performance in China drive iPhone and AMEA looks really good as well.
A: If you look at how we did for the quarter, we were relatively flat year over year. A key component of that improvement relative to the year-over-year performance that we've been achieving was there's a sequential improvement in foreign exchange. It was a headwind that we've been reporting for a period of time. What else is going on there is that our installed base of active devices reached an all-time high. We had the top-two selling smartphones in Urban China, according to Kantar. Mac and iPad buyers are over 50%, watch is over 75%, so there are positive signs there. In terms of stimulus, it's a clear focus of the team there but I'm not an economist and I don't want to ad lib on the effect of it.
In Europe, it grew double digits, 11%, really good growth across the board. Our definition of Europe in our segment reporting includes a lot of emerging markets like Turkey, the Middle East, Saudi, UAE, and we include India where we set an all-time revenue record. Also, Western Europe grew nicely, so we've seen very good results for us in the entire segment.
2:43 pm: Q: I know you don't want to give a lot of granularity, if I pull together your comments about the demand environment, are we to assume that there's risk to the product revenue portfolio being down in the December quarter? Is that Mac-related or iPhone-related? Where's that balanced view going in the December quarter?
A: We're not providing that level of color, we're giving you some data on Services. I'll repeat what I said earlier, we're very early in the cycle and a lot of new products and features that we're launching, we're very excited about them but it's early. The Apple Intelligence rollout is going to happen over time and not around the world.
2:44 pm: Q: Does the slow rollout of Apple Intelligence affect the upgrade and rollout of iPhone 16 around the world? How are we thinking about the demand cadence versus historically?
A: It's clearly, as you point out, a different cadence if you will, than we would normally do. As we talked about at WWDC, we wanted to give a comprehensive vision of Apple Intelligence and we said then that it would roll out over time and we're right on the what we said at WWDC. We're executing well. In terms of the demand curve, what we believe here is that it's a compelling reason for upgrading. That's both my personal experience and feedback that I'm getting, so we'll see. We're not projecting beyond the current quarter, we just don't do that.
2:46 pm: Q: As you think about this staggered rollout of Apple Intelligence, can you help us think through the potential global install base of phones that will have access in their native language or region in their next year or next two years, and what are some of the gating factors in the rollout?
A: If you look at our schedule, we started with US English on Monday. There's another release coming that adds additional features in December, not only in US English but also localized for UK, Australia, Canada, Ireland and New Zealand. Then we will add more languages in April. We haven't said the specifics yet in terms of languages, but we'll add more in April and then more as we step through the year. We're moving just as fast as possible while ensuring quality.
2:46 pm: Q: How is Apple, at a high level, how are you preparing for any potential tariffs and what have you done already to insulate from potential impacts on tariffs?
A: You know, I wouldn't want to speculate about those sorts of things, so I'll punt on that one.
2:48 pm: Q: Does this new era of Apple Intelligence require Apple to invest more in R&D beyond the current 7-8% of sales to capture this opportunity?
A: Our R&D growth has been significant during the last several years, and obviously as we move through fiscal 24, we have reallocated some of the existing resources to this new technology, to AI. The level of intensity that we're putting into AI has increased a lot, and maybe you don't see the full extent of it because we've also had some internal reallocation of the base of engineering resources within the company.
2:50 pm: Q: I understand Apple Intelligence is a feature on the phone today, but could it potentially have benefits to Services growth business or is that too bifurcated to really make a call this early?
A: Just to keep in mind, Apple Intelligence is also available on the Mac for the M Series products and on certain models of iPad, in addition to the phones. It's on all three. We have released a lot of APIs, and developers will be taking advantage of those APIs. That release has occurred as well and more are coming. I definitely believe that a lot of developers will be taking advantage of Apple Intelligence in a big way. I'll not forecast, but from an ecosystem point of view, it will be great for the user and the user experience.
2:51 pm: Q: Re mix on the iPhone side, given that Apple Intelligence will be a consistent feature set across iPhone 16 family versus iPhone 15 Pro and Pro Max, are you seeing any change in behavior from the consumer in terms of mix?
A: We've been constrained in October on the Pro and Pro Max so it's tough to answer. It's too early in the curve to call the precise mix on the consumer versus the Pro. We'll see.
2:52 pm: Q: How do you see the Google revenue sharing agreement and the deal that Apple has with Safari, and how do the potential outcomes there come out?
A: I don't want to speculate on that, it's an ongoing legal case. I'll save that for another day.
2:54 pm: Q: Some of the components in Services, some parts of the Apple One bundle like Music, News and Arcade are not the market leading offerings. What other services could we see having wider or widening addressable markets like in Pay or Advertising?
A: We have lots of opportunity in all of those. There's lots of customers to try to convince to take advantage of it and we're going to continue investing in services and adding new features and whether it's News+ or Music or Arcade, that's what we're going to do. Keep in mind that, for us, we're more focused on being the best rather than being most. In some cases, not all, but they are not cross platform. We make them for our customers only. That, in some cases, changes the person who's going to sell the most. But our objective is to make the best.
2:55 pm: Q: Luca, one piece of unfinished business was your pledge to get to a net neutral cash position and over the last two years, you've stayed around $50 billion of net cash. We've seen situations in the past where elevated marketing spend or other programs brought increases in market share. Do you see incremental ways to put that cash to work or will we see continued increased shareholder returns?
A: OpEx has gone up over the years, and we've seen a significant expansion in gross margin, maybe to a level I wouldn't have expected. We've done a very good job on a number of fronts, and when we plan, we think about all different areas of the business where we can deploy our resources. We look after the business first and then if we have excess cash, we will return it to our shareholders, and the plan has worked out quite well so far.
2:57 pm: The last question started with a question about spec differentiation between iPhone 16 Pro and base models isn't as big as prior years, and a shift in strategy... but then the call dropped.
The call is ending without a final question.
2:57 pm: Good luck in the future, Luca, and stay tuned for new CFO Kevan Parekh next quarter!
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