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    AAPL
    Earnings call· Dec 2024(Q1 FY25)

    Apple Q1 FY25 earnings call AAPL

    Jan 30, 2025 Source

    Executive summary

    Apple Q1 FY25 — Record Revenue and EPS Driven by Strong iPhone, Mac, and Services Performance

    Apple delivered record revenue and EPS in Q1 FY25, fueled by strong performance across its product and services segments, particularly Mac and iPad. The company's installed base reached a new high, with Apple Intelligence showing early positive impact on iPhone demand in available markets. Management remains optimistic about the product pipeline and the potential for continued innovation, while navigating competitive markets and foreign exchange headwinds.

    Highlights

    5

    • Total revenue reached an all-time record of $124.3 billion, up 4% year-over-year.

    • EPS set an all-time record of $2.40, 10% higher year-over-year.

    • Services revenue hit an all-time record of $26.3 billion, growing 14% from a year ago.

    • Mac revenue was $9 billion, up 16% year-over-year, driven by new lineup excitement.

    • iPad revenue was $8.1 billion, up 15% from a year ago, with over half of purchasers new to the product.

    Concerns

    2

    • Greater China revenue was down 11% year-over-year, with over half of the decline due to channel inventory changes.

    • Wearables, Home and Accessories revenue was $11.7 billion, down 2% year-over-year.

    Guidance & targets

    7
    CategoryTargetConfidence
    March quarter total company revenue growth
    low to mid-single digits year-over-year
    high materiality
    High
    March quarter Services revenue growth
    low double digits year-over-year
    medium materiality
    High
    March quarter gross margin
    between 46.5% and 47.5%
    high materiality
    High
    March quarter operating expenses
    between $15.1 billion and $15.3 billion
    medium materiality
    High
    March quarter OI&E
    around negative $300 million
    low materiality
    High
    March quarter tax rate
    around 16%
    low materiality
    High
    Foreign exchange headwind impact on March quarter revenue
    about 2.5 percentage points
    medium materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Total Company
    Achieved all-time revenue record.
    		$124.3B4%——
    Products
    Growth driven by iPad and Mac.
    		$98B2%——
    Services
    Achieved all-time revenue record, growing in every geographic segment and achieving all-time records in developed and emerging markets.
    		$26.3B14%——
    iPhone
    Reached all-time iPhone revenue records in dozens of markets and regions. Grew in the majority of markets tracked, including Canada, Western Europe, Japan, Latin America, Middle East, and South Asia.
    		$69.1Broughly flat——
    Mac
    Driven by significant excitement around the latest Mac lineup. Double-digit growth in every geographic segment.
    		$9B16%——
    iPad
    Driven by strong interest for the latest products, specifically the new iPad mini and iPad Air.
    		$8.1B15%——
    Wearables, Home and Accessories
    Facing a difficult compare against the Watch Ultra 2 launch last year.
    		$11.7B-2%——
    Greater China
    Over half of the decline was driven by a change in channel inventory.
    		—-11%——

    Operational metrics

    18
    Diluted earnings per share (EPS)
    $2.4010% higher year-over-year
    Q1 FY25

    All-time record EPS.

    Company gross margin
    46.9%up 70 basis points sequentially
    Q1 FY25

    At the high end of guidance range.

    Products gross margin
    39.3%up 300 basis points sequentially
    Q1 FY25

    Strong sequential improvement.

    Services gross margin
    75%up 100 basis points sequentially
    Q1 FY25

    Strong performance in the Services segment.

    Operating expenses
    $15.4Bup 7% year-over-year
    Q1 FY25

    Landed at the midpoint of guidance range.

    Net income
    $36.3B
    Q1 FY25

    All-time record.

    Cash and marketable securities
    $141B
    Q1 FY25

    Ended the quarter with this balance.

    Total debt
    $97B
    Q1 FY25

    After repaying $1 billion in maturing debt and decreasing commercial paper by $8 billion.

    Net cash
    $45B
    Q1 FY25

    At the end of the quarter.

    Capital returned to shareholders
    $30B
    Q1 FY25

    Total amount returned during the quarter.

    Dividends and equivalents
    $3.9B
    Q1 FY25

    Part of capital return program.

    Open market share repurchases
    $23.3B
    Q1 FY25

    Part of capital return program.

    Cash dividend per share
    $0.25
    Q1 FY25

    Declared by Board of Directors, payable on February 13, 2025.

    iPhone customer satisfaction (U.S.)
    96%
    Q1 FY25

    High levels of customer satisfaction.

    Mac customer satisfaction (U.S.)
    94%
    Q1 FY25

    High levels of customer satisfaction.

    iPad customer satisfaction (U.S.)
    96%
    Q1 FY25

    High levels of customer satisfaction.

    Apple Watch customer satisfaction (U.S.)
    94%
    Q1 FY25

    High levels of customer satisfaction.

    Paid subscriptions across platform
    well over 1 billiongrew double digits
    Q1 FY25

    Reflects increased customer engagement with Services offerings.

    Industry KPIs

    6
    MetricValueDetails
    Capital return FCF$30BUSD
    Gross margin drivers46.9%%
    Company specific kpisover half%
    Market share commentarytop-selling model
    Installed base refresh runwayover 2.35 billionactive devices
    Revenue mix by end market segment—

    Product announcements

    4
    ProductTypeDetails
    Apple Intelligenceexpansion
    Apple TV+ showsroadmap
    Find My servicelaunch
    Apple Retail Storesexpansion

    Risks & headwinds

    3
    Foreign exchange headwindMarch quarter (Q2 FY25)

    negative impact on revenue of about 2.5 percentage points on a year-over-year basis

    Mitigation: Not explicitly stated, but management's guidance for the March quarter already incorporates this headwind.

    Competitive market in ChinaQ1 FY25

    Greater China revenue down 11% year-over-year

    Mitigation: Not explicitly stated, but Apple Intelligence rollout and fiscal stimulus are potential future drivers.

    Difficult compare for Wearables, Home and AccessoriesQ1 FY25

    Wearables, Home and Accessories revenue down 2% year-over-year

    Mitigation: Against the Watch Ultra 2 launch last year.

    Q&A highlights

    8

    How is Apple Intelligence impacting iPhone demand, and what features are most used?

    Tim Cook confirmed that markets with Apple Intelligence rollout saw stronger year-over-year iPhone 16 performance. Users are engaging with Writing Tools, Image Playground, Genmoji, visual intelligence, and Clean Up. The impact is still early, as the second release was only available for 2.5 weeks in the December quarter in English-speaking countries.

    “We did see that the markets where we had rolled out Apple Intelligence that the year-over-year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available.”

    asked by Erik Woodring · answered by Timothy Cook

    2 min read5 chapters

    Detailed Narrative

    01

    Apple Intelligence Driving Product Demand

    Apple Intelligence, launched in October and expanded in December, is showing early signs of positively impacting iPhone demand. Markets where Apple Intelligence features were available saw stronger year-over-year performance for the iPhone 16 family compared to markets where it was not. Key features like Writing Tools, Image Playground, Genmoji, and Clean Up are being actively used by customers, with further language rollouts planned for April.

    02

    Strong Performance in Mac and iPad Categories

    The Mac and iPad segments demonstrated robust growth, with Mac revenue up 16% and iPad revenue up 15% year-over-year. This growth was attributed to strong uptake of new products, including M4-based Macs, and the continued success of the MacBook Air. The company noted that over half of iPad sales in the quarter were to new customers, indicating continued market expansion.

    03

    Emerging Markets as a Growth Driver

    Apple continues to see significant momentum in emerging markets, with all-time revenue records set in Latin America, the Middle East, and South Asia. India was highlighted as a particularly strong market, setting a December quarter record and seeing the iPhone as a top-selling model. The company plans to open four new stores in India, emphasizing the long-term growth potential in these regions where Apple currently holds modest market share.

    04

    Services Business Continues Record Growth

    The Services segment achieved an all-time revenue record of $26.3 billion, growing 14% year-over-year. This growth was broad-based across all geographic segments and service offerings. The installed base of active devices reached a new all-time high of over 2.35 billion, contributing to increased customer engagement and over 1 billion paid subscriptions across the platform.

    05

    Capital Return Program and Cash Position

    Apple ended the quarter with $141 billion in cash and marketable securities and a net cash position of $45 billion. The company returned over $30 billion to shareholders during the quarter, including $3.9 billion in dividends and $23.3 billion through open market repurchases of 100 million Apple shares. An update to the capital return program is expected with the March quarter results.

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