Q2 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Apple expects Services revenue to grow double digits, at a rate similar to the first half of the fiscal year, indicating strong momentum in this high-margin segment.
- Apple sees significant growth opportunities in emerging markets such as India, Saudi Arabia, Mexico, Turkey, Brazil, and Indonesia, where market share is low but populations are large and growing, potentially driving future revenue growth.
- Apple is optimistic about opportunities in generative AI across its devices, suggesting potential for innovation and new products that could fuel future growth.
- iPhone revenue is expected to decline in the June quarter, with analysts estimating it will be down mid-single digits. This indicates continued weakness in one of Apple's key product lines.
- Greater China revenue declined by 8% year-over-year, highlighting ongoing challenges in this important market. Tim Cook acknowledged that while iPhone grew in Mainland China, other products "didn't fare as well," and emphasized that China remains "the most competitive market in the world."
- Potential risk of losing traffic acquisition revenue, as there are concerns that Apple may lose some revenue from agreements like those with Google due to legal cases and competitive pressures. This could impact the monetization of Apple's mobile platform.
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June Quarter Guidance
Q: Explain June quarter guidance and Services momentum.
A: Apple expects to grow low single digits in total for the company in the June quarter. Services are expected to grow double digits at a rate similar to the first half of the fiscal year. The iPad is also expected to grow double digits. Services have seen strong performance across the board, with records in several categories and geographic segments. The subscription business is performing well, with paid accounts growing double digits. -
China Sales Outlook
Q: Is the China market turning around?
A: In Q2, Greater China revenue was down 8%, an acceleration from the previous quarter, driven by iPhone. iPhone grew in Mainland China on a reported basis. The top two smartphones in urban China are iPhones, and the reception during Tim Cook's recent visit was very positive. Apple remains optimistic about China in the long term. -
AI and CapEx Spending
Q: Will AI affect CapEx spending?
A: Apple is excited about generative AI opportunities and has spent over $100 billion in R&D over the past five years. On CapEx, Apple uses a hybrid model and plans to continue along the same lines, sharing investments with suppliers and partners. -
Gross Margins and Commodity Costs
Q: Are component costs rising, and how will they affect margins?
A: Commodity and component costs have been favorable recently, though memory prices have started to rise slightly. Apple reported a high gross margin of 46.6%, the highest in decades. The company tries to buy ahead when cycles are favorable to mitigate headwinds. -
Capital Allocation Strategy
Q: Will Apple take on debt to reach net cash neutral?
A: Apple is working towards its net cash neutral goal and has increased its buyback allocation from $90 billion to $110 billion. Once the goal is reached, Apple will reassess the optimal capital structure, but it is too early to comment on taking on leverage. -
Impact of EU DMA
Q: What is the impact of the EU DMA on Apple?
A: It's too early to tell. Apple implemented alternate app stores and billing in March in the EU and is focused on complying while mitigating impacts to user privacy and security. -
iPhone Demand Trends
Q: Are customers shifting from Pro models to standard iPhones?
A: Apple continues to see strong interest in its top-of-the-range products. Consumers want the best products, and Apple has made purchases more affordable through financing solutions like installment plans and trade-in programs. This trend is valuable in both developed and emerging markets and is reflected in Apple's gross margins. -
Services Growth Drivers
Q: What drove the acceleration in Services growth?
A: Apple had all-time records in both developed and emerging markets, with strong performance across categories. Fast-growing areas like cloud, video, and payment services set all-time revenue records. Apple expects double-digit Services growth in the June quarter similar to the first half. -
Emerging Markets Growth
Q: What's driving momentum in India—retail expansion or supply chain?
A: Apple grew strong double digits in India, achieving a new March quarter revenue record. The company is producing in India to be competitive and has opened new stores. Apple is expanding channels, working on the developer ecosystem, and sees enormous opportunity. -
Spurring Replacement Demand
Q: Will you deploy capital to spur replacement demand?
A: Innovation spurs upgrade cycles, and Apple works on multiple variables including economic factors and carrier offerings. The company has made progress with financing solutions and trade-in programs and will continue to invest in these areas. The strong dollar has affected reported results, but demand in local markets is stronger. -
iPhone Channel Inventory
Q: What are the iPhone channel inventory levels?
A: Apple decreased channel inventory during the March quarter, which is typical for Q2, and is comfortable with the overall channel inventory. -
Vision Pro in Enterprise
Q: What are top enterprise use cases for Vision Pro?
A: There are many use cases, including field service, training, healthcare applications like pre-op surgery preparation and advanced imaging, and command control centers. Apple is focused on growing the ecosystem and has seen extraordinary enthusiasm from enterprises.