Q1 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- Record levels of iPhone upgraders: Apple achieved an all-time record for iPhone upgraders, with the iPhone 16 outperforming the iPhone 15 across two quarters following its launch. In markets where Apple Intelligence was launched, sales outperformed other markets, indicating that new features are driving customer demand.
- Strong growth in emerging markets, particularly India: Apple reported double-digit growth in its installed base in emerging markets, with India setting a December quarter revenue record. The iPhone was the top-selling model in India, and Apple is expanding its presence by opening four new stores there. With a modest market share in the world's second-largest smartphone market, there is significant upside potential.
- Services revenue reached an all-time high: Apple's Services segment achieved an all-time revenue record of $26.3 billion, up 14% year-over-year, with strength across all geographic segments and services. The number of paid subscriptions surpassed 1 billion, reflecting increasing customer engagement and contributing significantly to overall growth.
- Declining revenue in Greater China: Apple's Greater China revenue decreased by 11% year-over-year, indicating challenges in a key market. Over half of the decline was due to channel inventory reductions, but competitive pressures and the lack of Apple Intelligence rollout contribute to headwinds. "If you look at our Greater China revenue for the quarter, we were down 11% year-over-year."
- Potential tariff impacts due to political changes: There is uncertainty regarding the potential impact of tariffs under future political scenarios, such as a possible Trump presidency. Management acknowledged the situation but did not provide details, which may imply potential future headwinds. "We are monitoring the situation and don't have anything more to add than that."
- Uncertainty about sustainability of growth in Macs and iPads: Despite strong revenue growth of 16% in Mac and 15% in iPad, management declined to project future growth at the category level, suggesting the recent performance may not be sustainable. "I don't want to project at the category level for the future, but we're incredibly pleased with both the Mac and the iPad for the quarter."
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +4% | Strong Mac and iPad performance and +14% Services growth led to higher revenue, despite softer iPhone sales in some regions. The expanding installed base of over 2.35 billion active devices also boosted sales and service engagement, positioning Apple for continued growth. |
Mac | +16% | Higher net sales of new Mac laptops featuring the M4 family of chips and strong brand loyalty drove Mac revenue growth. This performance helped offset headwinds in certain emerging markets, reflecting Apple’s focus on premium hardware and innovation. |
iPad | +15% | Strong demand for the latest iPad models, particularly the iPad Air, fueled growth, with over half of Q1 iPad sales coming from new customers. This success indicates healthy market adoption and potential for further penetration in education and consumer segments. |
Services | +14% | Broad-based growth across the App Store, advertising, and cloud services, coupled with over 1 billion paid subscriptions, propelled revenue to $26.34 billion. Apple’s focus on new features (like Tap to Cash) and increasing customer engagement further supported this expansion. |
Europe | +11% | Higher net sales of iPhone and Services plus a favorable currency impact drove revenue gains in Europe. Apple’s ongoing efforts to broaden its European customer base and strengthen its services ecosystem contributed to this solid regional performance. |
Greater China | -11% | Lower iPhone sales and channel inventory changes accounted for over half of the decline, compounded by intense local competition. Lack of an immediate rollout for Apple Intelligence also affected replacement cycles, though new subsidy programs could offer future upside. |
Net Income | +7% | Revenue gains across Mac, iPad, and Services lifted net income to $36.33 billion, while disciplined cost management supported profitability. Ongoing R&D investments continued, but they did not outweigh the broad-based revenue growth in Q1. |
EPS (Diluted) | +10% | The rise in per-share earnings reflects both net income growth and benefits from Apple’s share repurchase program, which reduced the average diluted share count. This enhanced shareholder value through higher EPS, showcasing Apple’s ongoing commitment to returning capital. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q2 2025 | low to mid single digits year-over-year | low to mid single digits year-over-year | no change |
Services Revenue | Q2 2025 | double digits year-over-year | low double digits year-over-year | no change |
Gross Margin | Q2 2025 | 46% – 47% | 46.5% – 47.5% | raised |
Operating Expenses | Q2 2025 | $15.3B – $15.5B | $15.1B – $15.3B | lowered |
Other Income & Expense | Q2 2025 | negative $250M | negative $300M | lowered |
Tax Rate | Q2 2025 | 16% | 16% | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue (YoY Growth) | Q1 2025 | Low to mid-single digits YoY | ~3.95% YoY, from $119,575 million in Q1 2024To $124,300 million in Q1 2025 | Met |
Services Revenue (YoY Growth) | Q1 2025 | Double digits YoY | ~13.9% YoY, from $23,117 million in Q1 2024To $26,340 million in Q1 2025 | Met |
Gross Margin | Q1 2025 | 46% – 47% | ~46.9%, calculated as ($124,300 million - $66,025 million) / $124,300 million | Met |
Operating Expenses (OpEx) | Q1 2025 | $15.3 billion – $15.5 billion | $15.443B (SG&A: $7,175 million + R&D: $8,268 million) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Services revenue reaching record levels | Q4 2024: $25B, +12% YoY, all-time highs in paid subscriptions ; Q3 2024: $24.2B, +14% YoY ; Q2 2024: $23.9B, +14% YoY | Reached $26.3B, +14% YoY, broad-based growth, over 1 billion paid subscriptions | Recurring topic, consistently strong growth and expanding subscriber base |
Apple Intelligence (AI) features, generative AI | Q4 2024: Initial launch of AI features (writing tools, conversational Siri) and upcoming ChatGPT integration ; Q3 2024: Staggered rollout, additional capabilities (Writing Tools, Image Playground) ; Q2 2024: Significant investments in generative AI | Emphasis on expanded language support in April 2025, new Siri upgrade, strong adoption where available, and privacy via Private Cloud Compute | Expanding topic, driving engagement and iPhone demand, likely a key future differentiator |
Greater China performance fluctuations | Q4 2024: Flat YoY, benefitted from FX improvement ; Q3 2024: -6.5% YoY, half attributed to currency ; Q2 2024: -8% YoY, iPhone growth offset by challenges in other products | Revenue -11% YoY. Half of the decline from channel inventory reduction; no Apple Intelligence rollout yet; market remains “most competitive” | Recurring challenge, performance varies with currency, inventory, and competitive intensity |
Emerging markets momentum (India) | Q4 2024: All-time record, 4 new stores planned ; Q3 2024: Quarterly revenue record, strong Mac performance ; Q2 2024: Double-digit growth, new retail stores, local production focus | India set a December quarter record; iPhone is top-selling there; announced 4 new stores, sees significant upside | Consistent positive focus, seen as a major growth driver |
Potential tariff impacts amid political changes | Q4 2024: CEO would not speculate ; Q3 2024: Not mentioned; Q2 2024: Not mentioned | Monitoring situation, no additional info provided | Intermittent mention, no substantive updates |
Shifts in iPhone upgraders, upgrade patterns | Q4 2024: AI features considered a key upgrade driver, iOS 18.1 adoption rate doubled vs. 17.1 ; Q3 2024: iPhone 15 outperforming iPhone 14, strong China upgraders ; Q2 2024: Emphasis on innovation, financing solutions, and upcoming upgrade wave | Record upgraders, iPhone 16 outperformed prior generation; Apple Intelligence in some markets boosted demand | Recurring theme, sustained interest in new models and AI features |
Mac and iPad growth sustainability concerns | Q4 2024: Mac +2% YoY, iPad +8% YoY; no direct long-range sustainability comment ; Q3 2024: Mac +2% YoY, iPad +24% YoY but caution on year-ago product launches ; Q2 2024: Mac +4% YoY, iPad -17% YoY, with no explicit future outlook | Mac +16% YoY, iPad +15% YoY, strong demand for M4 products and higher entry-level iPads; no direct guidance on future | Ongoing category, healthy growth but cautious outlook about long-term demand |
R&D spending increases affecting margins | Q4 2024: Heavy R&D in AI, margins still near record levels ; Q3 2024: Increased AI/ML focus in R&D, no specific margin impact ; Q2 2024: No mention of margin effects, ongoing AI investments | Not mentioned in Q1 2025 | Less mentioned recently, no direct margin impact disclosed |
Competition and currency challenges in key mkts | Q4 2024: China benefited from sequential FX improvement ; Q3 2024: 1.5 ppt FX margin headwind, China declines partly currency-driven ; Q2 2024: 140 bps YoY FX headwind, 30 bps in next quarter | Facing 2.5 ppt FX headwind; tough competition in China | Consistently referenced, currency and competition remain major headwinds |
Traffic acquisition revenue risk | Q4 2024: Not mentioned; Q3 2024: Not mentioned; Q2 2024: Possible risk from AI changes, no direct detail | Not mentioned in Q1 2025 | No longer mentioned, dropped after Q2 2024 |
Memory component cost pressure | Q4 2024: NAND, DRAM prices rising ; Q3 2024: Memory costs up, other commodity costs down ; Q2 2024: Slight headwind from memory | Not mentioned in Q1 2025 | No further updates, last discussed in Q4 2024 |
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China Sales Decline
Q: How did China revenue perform this quarter?
A: Our Greater China revenue declined by 11% year-over-year, with over half of this decline driven by a reduction in channel inventory. We have not yet rolled out Apple Intelligence in China, and markets where we have, like the U.K., are performing better. China remains the most competitive market, but recent fiscal stimulus announced in January, covering categories we operate in, may positively impact future performance. -
Gross Margin Outlook
Q: Why is gross margin guidance flat for next quarter?
A: We are guiding gross margins to be between 46.5% and 47.5% for the March quarter. Factors include expected foreign exchange headwinds affecting revenue and margins, offset by favorable costs and strong services mix. Additionally, moving from Q1, which is a large quarter for products, to Q2 results in a loss of leverage. -
Apple Intelligence Boosting iPhone Sales
Q: How is Apple Intelligence impacting iPhone demand?
A: In markets where Apple Intelligence is available, the iPhone 16 models are selling better than in markets without it. Customers are actively using features like Writing Tools, Image Playground, and Genmoji. Early indications are positive, despite limited rollout during the December quarter. -
Record iPhone Upgraders
Q: What drove the record number of iPhone upgraders?
A: We set an all-time record for iPhone upgraders, with the installed base reaching a new high. The iPhone 16 family has outperformed the 15 family since launch, suggesting compelling reasons to upgrade. In markets with Apple Intelligence, performance was stronger compared to those without it. -
Emerging Markets Growth
Q: Can emerging markets offset China headwinds?
A: We are seeing robust growth in emerging markets like India, which set a December quarter record. The iPhone was the top-selling model in India, and with our modest market share in such large markets, there's significant upside potential that could help offset challenges in China. -
Services Growth and Margins
Q: How sustainable is Services growth and margin expansion?
A: Our Services business had an all-time record, growing 14% in the December quarter, with strength across all segments. We reached over 1 billion paid subscriptions. Services are accretive to overall company margins, benefiting from scale in areas like payment services and iCloud. -
Strong Mac and iPad Sales
Q: Are strong Mac and iPad sales sustainable?
A: Mac sales grew 16%, driven by strong uptake of our new M4-based products and the continued success of the MacBook Air. We believe we have the best AI PC for running workloads, with silicon designed for these tasks. iPad grew 15%, primarily due to iPad Air and the entry-level iPad, with over half of sales to new customers, indicating ongoing demand. -
Supply Chain in India
Q: What's the strategy for supply chain planning in India?
A: We are manufacturing in India for both the domestic market and for export. Our business requires economies of scale to make in-country manufacturing sensible, so operations will serve both domestic and export needs. -
Potential Tariff Impact
Q: How will tariffs under Trump 2.0 affect Apple?
A: We are monitoring the situation regarding potential tariffs but have nothing further to add at this time. -
Pricing Strategy and Market Share
Q: Will adjusting pricing unlock more growth?
A: We will continue with our disciplined pricing strategy, which has served us well. While we always consider short-term and long-term factors, we don't plan to depart from our current approach. -
Device Lifespan and Upgrade Opportunity
Q: How does device lifespan affect future upgrades?
A: Device lifespan varies among users, from early adopters who upgrade frequently to others who wait longer. The strong sales during the COVID period present a huge opportunity for upgrades across multiple product categories in the future. -
Channel Inventory Levels
Q: Are channel inventories elevated elsewhere besides China?
A: We are comfortable with our iPhone channel inventory levels globally. In China, inventory reduced over the quarter due to higher-than-expected sales towards the end. -
Agentic AI and Siri Upgrade
Q: Will the upgraded Siri be a killer feature in Apple Intelligence?
A: The killer feature varies by user, but many will use multiple features daily. Siri is one significant feature and will be coming over the next several months. -
Form Factor Innovation
Q: Is there room for more iPhone form factor innovation?
A: We believe there's a lot more to come and are optimistic about our product pipeline. There's plenty of innovation left in the smartphone. -
Impact of Lower Cost Compute (DeepSeek)
Q: How does the DeepSeek situation impact margins?
A: Innovation that drives efficiency is positive. Our tight integration of silicon and software continues to serve us well. We take a prudent approach to capital expenditure and leverage a hybrid model. -
Acceleration of Apple Intelligence Adoption
Q: What could accelerate Apple Intelligence adoption?
A: Adoption will grow as more devices support it and as we add more languages, with the next rollout in April. Features are compelling, and once users start using them, they can't imagine not having them.