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    AAPL
    Earnings call· Sep 2024(Q4 FY24)

    Apple Q4 FY24 earnings call AAPL

    Oct 31, 2024 Source

    Executive summary

    Apple Q4 FY24 — Record Revenue Driven by iPhone and Services Growth

    Apple delivered a strong September quarter, achieving record revenue driven by robust iPhone sales across all geographies and an all-time high in Services revenue. The company is embarking on a new chapter with the introduction of Apple Intelligence, which is expected to be a compelling upgrade driver for its product ecosystem. Management is focused on long-term innovation and strategic investments, including in AI, while maintaining a disciplined capital return program.

    Highlights

    5

    • Total revenue reached a September quarter record of $94.9 billion, up 6% YoY.

    • iPhone revenue set a September quarter record of $46.2 billion, up 6% YoY, with growth in every geographic segment.

    • Services revenue achieved an all-time record of $25 billion, up 12% YoY.

    • Operating cash flow was a September quarter record at $26.8 billion.

    • Diluted EPS was $1.64, up 12% YoY, setting a September quarter record (excluding one-time tax charge).

    Concerns

    2

    • Wearables, Home and Accessories revenue was $9 billion, down 3% YoY.

    • A one-time income tax charge of $10.2 billion was recorded related to the reversal of the European General Court's State Aid decision.

    Guidance & targets

    7
    CategoryTargetConfidence
    December quarter total company revenue growth
    low to mid-single digits year-over-year
    high materiality
    High
    December quarter Services revenue growth
    double digits at a rate similar to what we reported in the fiscal year 2024
    medium materiality
    High
    December quarter gross margin
    between 46% and 47%
    high materiality
    High
    December quarter operating expenses
    between $15.3 billion and $15.5 billion
    medium materiality
    High
    December quarter Other Income and Expense (OI&E)
    around negative $250 million
    low materiality
    High
    December quarter tax rate
    around 16%
    low materiality
    High
    Carbon neutrality goal
    carbon neutral across our entire footprint by the end of the decade
    low materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    iPhone
    Set a September quarter record in total and across several markets, including the U.S., Middle East, Korea, and South Asia. Many iPhone models were among the top-selling smartphones globally.
    Customer satisfaction (iPhone 15 family): 98% in the U.S. (451 Research)Installed base: new all-time high
    		$46.2B6%——
    Mac
    Driven by strength in MacBook Air. Customers are embracing Apple silicon, with new M4 family chips introduced.
    Installed base: all-time highNew customers: about half of customers in the quarter were new to MacCustomer satisfaction: 95% in the U.S. (451 Research)
    		$7.7B2%——
    iPad
    Strong performance in many emerging markets with double-digit growth in Mexico, Brazil, the Middle East, India, and South Asia, in addition to growth in developed markets.
    Installed base: all-time highNew customers: over half of customers were new to the productCustomer satisfaction: 97% in the U.S.
    		$7B8%——
    Wearables, Home and Accessories
    Introduced Apple Watch Series 10 and AirPods 4, along with new hearing health features for AirPods Pro 2.
    Apple Watch installed base: new all-time highNew Apple Watch customers: over half of customers were new to the productApple Watch customer satisfaction: 96% in the U.S. (451 Research)
    		$9B-3%——
    Services
    Achieved an all-time revenue record with broad-based strength globally, reaching records in both developed and emerging markets. Increased customer engagement with Services offerings.
    Transacting accounts: new all-time highPaid accounts: new all-time high, double-digit growth YoYPaid subscriptions: well over 1 billion, double-digit growth YoY (more than double 4 years ago)
    		$25B12%——
    Europe
    Achieved September quarter revenue record with double-digit growth. Includes strong performance in emerging markets like Turkey, Middle East, and India.
    		—11%——

    Operational metrics

    16
    Company gross margin
    46.2%
    Q4 FY24

    Near the high end of guidance range.

    Products gross margin
    36.3%up 100 bps sequentially
    Q4 FY24

    Primarily driven by favorable mix.

    Services gross margin
    74%unchanged from prior quarter
    Q4 FY24

    Unchanged from the prior quarter.

    Operating expenses
    $14.3Bup 6% YoY
    Q4 FY24

    At the midpoint of guidance range.

    Net income (excluding one-time tax charge)
    $25B
    Q4 FY24

    Excluding a one-time income tax charge of $10.2 billion.

    Diluted EPS (excluding one-time tax charge)
    $1.64up 12% YoY
    Q4 FY24

    September quarter record, excluding a one-time income tax charge of $10.2 billion.

    Cash and marketable securities
    $157B
    Q4 FY24

    Ended the quarter with this balance.

    Total debt
    $107B
    Q4 FY24

    After repaying $2.6 billion in maturing debt and increasing commercial paper by $7 billion.

    Net cash
    $50B
    Q4 FY24

    At the end of the quarter.

    Capital returned to shareholders
    $29B
    Q4 FY24

    Total amount returned during the quarter.

    Dividends and equivalents
    $3.8B
    Q4 FY24

    Part of capital returned to shareholders.

    Share repurchases
    $25B
    Q4 FY24

    Through open market repurchases.

    Cash dividend per share
    $0.25
    Q1 FY25

    Declared by Board of Directors.

    Apple Store openings
    2
    Q4 FY24

    New stores opened during the quarter.

    Education grant program expansion
    100
    Q4 FY24

    Expanded to new schools and communities.

    iOS 18.1 adoption rate
    twice as fastvs 17.1 adoption
    first 3 days

    Compared to iOS 17.1 adoption in the year-ago quarter, indicating strong interest in Apple Intelligence.

    Industry KPIs

    8
    MetricValueDetails
    Capital return FCF$29BUSD
    Gross margin drivers36.3%%
    Company specific kpis98%%
    Market share commentarytop-selling model
    Services peripheral attachwell over 1 billionpaid subscriptions
    Component supply constraintsconstrained
    Installed base refresh runwayall-time high
    Revenue mix by end market segment$94.9BUSD

    Product announcements

    9
    ProductTypeDetails
    Apple Intelligencelaunch
    iPhone 16launch
    M4, M4 Pro, M4 Max chipslaunch
    Mac lineup (iMac, MacBook Air, MacBook Pro, Mac mini)update
    iPad minilaunch
    Apple Watch Series 10launch
    AirPods 4launch
    AirPods Pro 2 hearing health featuresupdate
    Apple Vision Proexpansion

    Deals & partnerships

    3
    NVIDIAcustomer contract

    NVIDIA launched its Mac as a choice program, supported by AppleCare for Enterprise and Apple Professional Services, with over 10,000 Macs deployed worldwide.

    Novartiscustomer contract

    Novartis, a global pharmaceutical company, chose iPhone 16 as the standard mobile device for all employees.

    UC San Diego Healthpartnership

    UC San Diego Health is the first hospital to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room.

    Risks & headwinds

    3
    One-time income tax chargeQ4 FY24

    $10.2 billion

    Mitigation: Relates to the impact of the reversal of the European General Court's State Aid decision.

    Macroeconomic conditionsDecember quarter

    Potential impact on business and results of operations

    Mitigation: Guidance assumes macroeconomic outlook doesn't worsen from current projections.

    iPhone 16 Pro/Pro Max supply constraintsOctober 2024

    Constrained in October

    Mitigation: Company believes they will be out of constraint soon, aiming to balance supply and demand quickly.

    Q&A highlights

    10

    Can you elaborate on early feedback for Apple Intelligence and its potential impact on iPhone sales, especially given the strong iPhone performance?

    Tim Cook noted strong positive feedback from developers and customers for Apple Intelligence, with iOS 18.1 adoption being twice as fast as 17.1. He believes Apple Intelligence is a compelling upgrade reason for iPhones, but it's too early to attribute past iPhone performance to it as features just launched.

    “if you just look at the first 3 days, which is all we have obviously from Monday, the 18.1 adoption is twice as fast as the 17.1 adoption was in the year ago quarter. And so there's definitely interest out there for Apple Intelligence.”

    asked by Michael Ng · answered by Timothy Cook

    2 min read5 chapters

    Detailed Narrative

    01

    Apple Intelligence Rollout and Adoption

    Apple launched the first set of Apple Intelligence features in U.S. English for iPhone, iPad, and Mac users, including system-wide writing tools, a more natural Siri, and an intelligent Photos app. Early adoption of iOS 18.1 is twice as fast as iOS 17.1, indicating strong customer interest. Additional features, including more powerful writing tools, visual intelligence, and ChatGPT integration, are planned for December, along with localized English in several countries. More languages and features will roll out in 2025, with management expressing high excitement for its potential to redefine user experience and drive upgrades.

    02

    Product Innovation and Ecosystem Expansion

    The quarter saw significant product updates across the portfolio. New M4, M4 Pro, and M4 Max chips were introduced for Mac, positioning them as leading AI personal computers. The newest iPad mini was launched with Apple Pencil Pro support, and the Apple Watch Series 10 brought new health features like sleep apnea notifications. AirPods 4 introduced active noise cancellation, and AirPods Pro 2 received revolutionary hearing health capabilities. Apple Vision Pro expanded to Korea and UAE, continuing to deliver immersive spatial computing experiences with over 2,500 native spatial apps.

    03

    Services Momentum and Diversification

    Services achieved an all-time revenue record of $25 billion, growing 12% year-over-year, with broad-based strength in both developed and emerging markets. The installed base of active devices reached an all-time high, supporting ecosystem expansion. Paid accounts and paid subscriptions both grew double digits, with over 1 billion paid subscriptions across the platform, more than double the number from four years ago. Apple Pay celebrated its 10-year anniversary, expanding features to include reward redemption and loan access at checkout.

    04

    Geographic Performance and Market Penetration

    Apple set September quarter revenue records in the Americas, Europe, and the rest of Asia Pacific, as well as in numerous individual countries including the U.S., Brazil, Mexico, France, the U.K., Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. India achieved an all-time revenue record. China's performance was relatively flat year-over-year, benefiting from sequential improvement in foreign exchange rates, with the installed base of active devices reaching an all-time high and iPhone models being top sellers in urban China.

    05

    Leadership Transition and Capital Allocation

    CFO Luca Maestri announced his transition to a new role, with Kevan Parekh taking over. Maestri highlighted the company's strong financial performance, including a September quarter record revenue and operating cash flow of $26.8 billion. The company ended the quarter with $157 billion in cash and marketable securities and a net cash position of $50 billion. Apple returned over $29 billion to shareholders, comprising $3.8 billion in dividends and $25 billion through share repurchases, reflecting a continued commitment to shareholder returns while investing in the business.

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