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    Apple Inc (AAPL)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$169.34September 28, 2023
    Final Price$193.58December 28, 2023
    Price Change$24.24
    % Change+14.31%

    What went well

    • Strong iPhone Sales and Customer Satisfaction: iPhone revenue increased by 6% year-over-year to $69.7 billion. The iPhone 15 is outselling the iPhone 14 over the same period, indicating robust customer demand. Apple achieved an all-time record for iPhone upgraders, and the installed base hit a new all-time high . In the U.S., iPhone is 4 out of the top 5 selling smartphones, with a customer satisfaction rate of 99%.
    • Record Services Revenue and Growth in Subscriptions: Services revenue set an all-time record of $23.1 billion, up 11% year-over-year, with strong double-digit growth expected to continue. Paid subscriptions grew to over 1 billion, more than double the number from four years ago, indicating strong recurring revenue streams.
    • Expansion in Emerging Markets: India saw revenue grow strong double digits, hitting a quarterly revenue record. Other emerging markets like Indonesia also achieved quarterly records. Apple is successfully expanding its customer base in high-growth markets, contributing to its overall growth .

    What went wrong

    • Weakness in China, a key market for Apple, with iPhone revenue down mid-single digits even in constant currency, indicating increasing competition and slowing demand.
    • Concerns about lengthening replacement cycles and potential saturation in mature markets like the U.S., potentially leading to slower future sales growth.
    • Gross margins are at historically high levels (guiding 46% to 47%), suggesting limited room for further expansion, which could pressure profitability if revenues slow down.

    Q&A Summary

    1. China Sales Outlook
      Q: Are you still optimistic about China as a growth market?
      A: Tim Cook remains very optimistic about China over the long term, highlighting that Apple hit a new installed base high and saw growth in upgraders during the quarter.

    2. Product Gross Margins
      Q: What drove strong product gross margins, and what is the outlook?
      A: Luca Maestri explained that product gross margins increased 280 basis points sequentially due to a favorable mix with high-end iPhones performing well and leverage from the biggest quarter. They expect gross margins to expand further to 46% to 47%.

    3. Services Growth Outlook
      Q: Why won't Services growth accelerate in the March quarter?
      A: Negative foreign exchange is expected to be a headwind in the March quarter, and comparisons are more difficult. Services are expected to continue growing double digits, similar to the December quarter.

    4. iPhone 15 Performance
      Q: How is the iPhone 15 cycle performing amid concerns?
      A: iPhone revenues were up 6%, with strong global performance. The iPhone 15 is outselling iPhone 14 over the same period, and upgraders hit an all-time record. Customer satisfaction for iPhone 15 reached 99%.

    5. Vision Pro Potential
      Q: How will you measure Vision Pro's success over time?
      A: Each product has its own journey, and Apple is incredibly excited internally. They see significant potential but won't compare Vision Pro to other products.

    6. EU Regulatory Impact
      Q: What are the key App Store updates in Europe, and impact?
      A: Apple announced changes effective in March, including alternate billing and app stores, and opening NFC capabilities. The changes apply to the EU market, which is roughly 7% of global App Store revenue.

    7. AI Opportunities
      Q: Can Apple leverage on-device AI processing?
      A: Tim Cook believes there is a huge opportunity for Apple with generative AI and AI, without providing further details.

    8. China Demand and Competition
      Q: What are you seeing in China from demand and competition?
      A: In Mainland China, iPhone was down mid-single digits, with other products contributing to a larger contraction. Apple saw solid growth in upgraders, had 4 of the top 6 smartphone models in urban China, and was the top brand according to IDC.

    9. Americas Performance
      Q: How is the Americas market performing, especially iPhone?
      A: In the U.S., iPhone business grew in the December quarter, and the installed base hit an all-time high. Replacement cycles are difficult to measure, but Apple feels good about their position.

    10. Enterprise Focus
      Q: Will Apple become more enterprise-focused in the future?
      A: Apple believes they can do both consumer and enterprise. They see opportunities for Vision Pro in enterprise and are excited about employees choosing their own technology.

    11. CapEx and AI Investments
      Q: Will CapEx increase due to AI investments?
      A: Apple will not underinvest in the business and is making necessary investments across product, software, and services development.

    12. $5 Billion March Quarter Impact
      Q: Is the $5 billion impact in March quarter for products or total revenue?
      A: The $5 billion impact is entirely related to iPhone revenue, due to last year's supply disruptions and fulfillment of pent-up demand.

    13. Vision Pro Developer Ecosystem
      Q: Can you discuss support for Vision Pro developers and AI plans?
      A: Apple is excited about enterprise opportunities with Vision Pro, mentioning various enterprise apps. They have incredibly exciting AI work to discuss later this year.

    14. Installed Base Growth
      Q: Details on new users and how cohorts differ?
      A: Strong growth in emerging markets like India and Indonesia contributed to the installed base reaching a record high. New users are coming from regions with strong double-digit growth.

    15. Component Pricing and Margins
      Q: How are component pricing and margins outlook?
      A: Gross margins are expected to expand to 46% to 47%, considering the component environment, foreign exchange, and product mix.

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