Skip to content
    AAPL
    Earnings call· Jun 2024(Q3 FY24)

    Apple Q3 FY24 earnings call AAPL

    Aug 1, 2024 Source

    Executive summary

    Apple Q3 FY24 — Record Revenue and EPS, Strong Services Growth

    Apple delivered a strong June quarter, achieving record revenue and EPS, driven by robust Services performance and new iPad launches. The company highlighted significant advancements in AI with Apple Intelligence, which is expected to drive future upgrades across its product ecosystem. Despite some headwinds in iPhone and Wearables, and a decline in Greater China revenue, Apple remains optimistic about long-term growth and continues to invest heavily in innovation and its capital return program.

    Highlights

    5

    • June quarter revenue record of $85.8 billion, up 5% YoY

    • EPS grew double digits to $1.40, a June quarter record

    • Services revenue reached an all-time record of $24.2 billion, up 14% YoY

    • iPad revenue was $7.2 billion, up 24% YoY, driven by new product launches

    • Installed base of active devices reached an all-time high across all products and geographic segments

    Concerns

    4

    • iPhone revenue was $39.3 billion, down 1% YoY (though grew on a constant currency basis)

    • Wearables, Home and Accessories revenue was $8.1 billion, down 2% YoY

    • Greater China revenue decreased by 6.5% YoY, or less than 3% on a constant currency basis

    • Foreign exchange impact was a negative 230 basis points on revenue

    Guidance & targets

    7
    CategoryTargetConfidence
    September quarter total company revenue growth
    similar to the June quarter
    high materiality
    Medium
    September quarter Services revenue growth
    double digits at a rate similar to what we reported in the first 3 quarters of this fiscal year
    high materiality
    Medium
    September quarter gross margin
    between 45.5% and 46.5%
    high materiality
    Medium
    September quarter operating expenses
    between $14.2 billion and $14.4 billion
    medium materiality
    Medium
    September quarter Other Income & Expense (OI&E)
    around negative $50 million
    low materiality
    Medium
    September quarter tax rate
    around 16.5%
    low materiality
    Medium
    Foreign exchange impact on September quarter revenue
    negative impact of about 1.5 percentage points
    medium materiality
    Medium

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Products
    Revenue driven by the launch of the new iPad Pro and iPad Air. Gross margin down 130 bps sequentially, primarily due to mix, partially offset by favorable costs.
    		$61.6B2%—35.3%
    Services
    All-time record revenue, with all-time record in developed markets and June quarter record in emerging markets. Gross margin down 60 bps from last quarter. Growth driven by installed base expansion and increased customer engagement.
    		$24.2B14%—74%
    iPhone
    Revenue grew on a constant currency basis. Set June quarter records in several countries including the U.K., Spain, Poland, Mexico, Indonesia, and the Philippines. iPhone 15 performing better than iPhone 14 for the same number of weeks from launch.
    Installed base: all-time highCustomer satisfaction (iPhone 15 family, U.S.): 98%
    		$39.3B-1%——
    Mac
    Revenue driven by the MacBook Air powered by the M3 chip. Strong performance in emerging markets, with June quarter records in Latin America, India, and South Asia.
    Installed base: all-time highNew to Mac customers: 50%Customer satisfaction (U.S.): 96%
    		$7B2%——
    iPad
    Revenue driven by the launch of the new iPad Pro and iPad Air. Customers are appreciating the new design, display, performance, and AI capabilities.
    Installed base: all-time highNew to iPad customers: 50%Customer satisfaction (U.S.): 97%
    		$7.2B24%——
    Wearables, Home and Accessories
    Sequential acceleration from the March quarter. Facing difficult year-over-year comparisons due to prior year launches of AirPods Pro second generation, Watch SE, and Watch Ultra. Business has grown to almost $40 billion over the trailing 12 months, double what it was 5 years ago.
    Apple Watch new customers: almost 2/3Apple Watch installed base: all-time highCustomer satisfaction (Apple Watch, U.S.): 97%
    		$8.1B-2%——
    Greater China
    Revenue declined less than 3% on a constant currency basis. Improvement from the first half of the fiscal year. iPad returned to growth in Greater China.
    iPhone installed base: recordMainland China iPhone upgraders (June quarter): recordMac new customers (Mainland China): majorityiPad new customers (Mainland China): majorityWatch new customers (Mainland China): vast majority
    		—-6.5%——

    Operational metrics

    24
    Total company revenue
    $85.8B5% YoY
    Q3 FY24

    New June quarter revenue record, better than expected.

    Diluted EPS
    $1.4011% YoY
    Q3 FY24

    June quarter record.

    Foreign exchange impact on revenue
    230 bpsnegative
    Q3 FY24

    Negative impact on year-over-year revenue growth.

    Company gross margin
    46.3%-30 bps QoQ
    Q3 FY24

    Near the high end of guidance range, driven by product mix, offset by Services mix and cost savings.

    Products gross margin
    35.3%-130 bps QoQ
    Q3 FY24

    Primarily driven by mix, partially offset by favorable costs.

    Services gross margin
    74%-60 bps QoQ
    Q3 FY24

    Down from last quarter.

    Operating expenses
    $14.3B7% YoY
    Q3 FY24

    At the low end of guidance range.

    Net income
    $21.4B
    Q3 FY24

    Reported for the quarter.

    Cash and marketable securities
    $153B
    Q3 FY24

    Balance at the end of the quarter.

    Debt repaid
    $4.3B
    Q3 FY24

    Maturing debt repaid.

    Commercial paper increase
    $1B
    Q3 FY24

    Increase in commercial paper.

    Total debt
    $101B
    Q3 FY24

    Balance at the end of the quarter.

    Net cash
    $52B
    Q3 FY24

    Balance at the end of the quarter.

    Capital returned to shareholders
    $32B
    Q3 FY24

    Over $32 billion returned to shareholders during the quarter.

    Dividends and equivalents
    $3.9B
    Q3 FY24

    Part of capital returned to shareholders.

    Open market share repurchases
    $26B
    Q3 FY24

    Part of capital returned to shareholders.

    Cash dividend per share
    $0.25
    Q3 FY24

    Declared by the Board of Directors.

    Paid subscriptions on platform
    Over 1Bdouble digits YoY
    Q3 FY24

    Strong double-digit growth, more than double the number from 4 years ago.

    Apple Vision Pro native spatial apps
    2,500+
    Q3 FY24

    Number of native spatial apps available for Vision Pro.

    Apple Vision Pro compatible apps
    1.5M
    Q3 FY24

    Number of compatible apps available for visionOS.

    Apple TV+ nominations
    2,300
    to date

    Total nominations for Apple TV+ productions.

    Apple TV+ wins
    500
    to date

    Total wins for Apple TV+ productions.

    Apple TV+ Emmy Award nominations
    72
    upcoming awards event

    Best ever showing for the upcoming awards event.

    App Store revenue from European Union
    7%
    Q3 FY24

    Percentage of total App Store revenue generated from the European Union.

    Industry KPIs

    8
    MetricValueDetails
    Capital return FCF$32BUSD
    Gross margin drivers46.3%%
    Company specific kpis98%%
    Market share commentarytop-selling
    Services peripheral attachOver 1Bpaid subscriptions
    Component supply constraintsincreases
    Installed base refresh runwayall-time high
    Revenue mix by end market segment—

    Product announcements

    9
    ProductTypeDetails
    Apple Intelligencelaunch
    Apple Vision Proexpansion
    iOS 18update
    macOS Sequoiaupdate
    11- and 13-inch iPad Airlaunch
    iPad Pro with M4 chiplaunch
    Tap to Pay on iPhoneexpansion
    Services updates (Apple Maps, Apple Pay, Apple Music, Apple Fitness+)update
    Accessibility capabilities (eye tracking, music haptics, vocal shortcuts)update

    Deals & partnerships

    1
    OpenAIIntegration

    Integrating ChatGPT into experiences within iPhone, Mac, and iPad to enable users to draw on a broad base of world knowledge. Part of a staggered launch of Apple Intelligence features.

    Risks & headwinds

    8
    Foreign exchange impactQ3 FY24

    negative 230 basis points on revenue

    Mitigation: We try to hedge our exposures.

    Foreign exchange headwindSeptember quarter

    negative impact on revenue of about 1.5 percentage points

    Difficult compare for Wearables, Home and AccessoriesQ3 FY24

    down 2% YoY

    Competitive environment in Greater China

    most competitive in the world

    Macroeconomic factors in China

    weak China

    Component price inflation (memory)

    some increases on the memory front

    Mitigation: rest of the commodities, we see a continuous decline

    Challenging compare for MacSeptember quarter

    due to launch of MacBook Air 15-inch a year ago

    Challenging compare for iPadSeptember quarter

    due to 24% growth in June quarter from new product launches

    Q&A highlights

    8

    Can you elaborate on iPhone replacement cycles, the size of the aged iPhone base, and potential pent-up demand for new iPhones, especially with Apple Intelligence?

    The iPhone installed base hit an all-time high, and the iPhone 15 is outperforming the 14. It's too early to call upgrade rates mid-cycle, but Apple Intelligence provides a compelling reason for upgrades.

    “The installed base hit an all-time high during the quarter, and so we were very happy about that. iPhone, in general, grew in constant currency. And the 15, as you point out, if you look at the same number of weeks of the 15 from launch and compare that to the 14, the 15 is doing better than the 14.”

    asked by Erik Woodring · answered by Timothy Cook

    2 min read5 chapters

    Detailed Narrative

    01

    Apple Intelligence and AI Innovation

    Apple unveiled Apple Intelligence at WWDC, integrating AI and machine learning across its platforms. This includes Writing Tools, Image Playground, and an enhanced Siri, all built on a foundation of privacy with on-device processing and Private Cloud Compute. The company is also integrating ChatGPT for broader world knowledge, with a staggered rollout of features starting with developers this week and continuing over the next year, including more languages and regions.

    02

    Product Performance Highlights

    iPhone revenue was $39.3 billion, down 1% YoY but grew on a constant currency basis, with the iPhone 15 outperforming the 14. Mac revenue grew 2% to $7 billion, driven by the M3 MacBook Air, with half of new customers being new to Mac. iPad revenue surged 24% to $7.2 billion due to the launch of new iPad Pro and iPad Air models. Wearables, Home and Accessories revenue declined 2% to $8.1 billion, facing difficult year-over-year comparisons.

    03

    Services Momentum and Expansion

    Services achieved an all-time revenue record of $24.2 billion, up 14% YoY, with records in advertising, cloud, and payment services. Paid subscriptions exceeded 1 billion, more than double the number from four years ago. Apple continues to expand its services offerings, including new content on Apple TV+, new games on Apple Arcade, and updates to Apple Maps, Apple Pay, and Apple Music.

    04

    Geographic Performance and China Dynamics

    Apple set quarterly revenue records in over two dozen countries and regions, including Canada, Mexico, France, Germany, the U.K., India, Indonesia, the Philippines, and Thailand. In Greater China, revenue decreased by 6.5% YoY (less than 3% in constant currency), an improvement from the first half of the fiscal year. iPhone's installed base set a record in Greater China, and iPad returned to growth in the region, with a majority of Mac and iPad customers being new to the product.

    05

    Capital Allocation and Financial Position

    The company ended the quarter with $153 billion in cash and marketable securities and a net cash position of $52 billion. Apple returned over $32 billion to shareholders, including $3.9 billion in dividends and $26 billion through open market repurchases of 139 million shares. The Board declared a cash dividend of $0.25 per share.

    AI-generated summary of the company’s earnings call. Not investment advice.