AAPL Q4 2024: December-Quarter Revenue to Grow Low-Mid Single Digits
- Apple sees strong adoption of its new Apple Intelligence features, with Tim Cook stating that the adoption rate of version 18.1 is twice that of 17.1, indicating a high level of customer interest and a compelling upgrade reason.
- Apple's installed base of active devices reached an all-time high, with significant growth in key markets like China and Europe. In China, the top two selling smartphones in urban areas were iPhones, and over 50% of Mac and iPad buyers were new customers. In Europe, they experienced double-digit growth of 11%, with strong performance across both emerging markets like Turkey and India, and Western Europe.
- Apple has the strongest product lineup ever heading into the holiday season, including new Macs and health features, which Tim Cook believes will drive growth.
- Apple is guiding for only low to mid-single-digit revenue growth in the December quarter, which could indicate slowing growth despite new product launches and the holiday season. Management also avoided providing specific guidance on product revenue, suggesting potential softness in key product lines.
- The gradual rollout of Apple Intelligence features may limit immediate impact on sales, as the new AI features are initially limited to U.S. English and a few other English-speaking countries, with broader language support not arriving until later. This slow rollout could dampen the expected boost from these features.
- Apple may be exposed to potential future tariffs without a clear mitigation strategy, as management refused to discuss preparations for dealing with possible tariffs after the election cycle, leaving uncertainty about the potential impact on costs and margins.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Company Revenue Growth (YoY) | Q4 2024 | ~5% YoY | ~6% YoY (from 89,498 millionIn Q4 2023 to 94,930 millionIn Q4 2024) | Beat |
Services Revenue Growth (YoY) | Q4 2024 | “Double digits” YoY | ~12% YoY (from 22,314 millionIn Q4 2023 to 24,972 millionIn Q4 2024) | Met |
Gross Margin | Q4 2024 | 45.5% – 46.5% | ~46.2% ((94,930 million – 51,051 million) ÷ 94,930 million) | Met |
Operating Expenses (OpEx) | Q4 2024 | 14.2B – 14.4B | ~14.29B (Sum of SG&A: 6,523 million+ R&D: 7,765 million) | Met |
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December Quarter iPhone Growth
Q: Will iPhone revenue grow in December quarter?
A: Luca Maestri did not provide specific guidance on iPhone growth but stated they expect total company revenue to grow low to mid-single digits in the December quarter. He emphasized they are very early in the cycle with new products and Apple Intelligence features rolling out over time. -
Apple Intelligence Impact on Demand
Q: Will Apple Intelligence boost iPhone sales?
A: Tim Cook believes Apple Intelligence is a compelling upgrade reason. Early adoption of iOS 18.1 is twice as fast as the previous version, indicating strong interest. While the staggered rollout may affect demand timing, they expect it to positively impact upgrades. -
Gross Margin Outlook
Q: How will component prices affect gross margins?
A: Luca Maestri noted they expect gross margins between 46% to 47% in the December quarter despite increased NAND and DRAM costs. Commodity prices are moving down, and they are pleased with record gross margins achieved in fiscal '24. -
CapEx and AI Investments
Q: Will AI investments increase CapEx spending?
A: Luca Maestri said they will continue necessary investments, including in AI-related CapEx, but their hybrid data center model means CapEx may not significantly change. They are making all capacity needed for Apple Intelligence features available. -
China Demand Trends
Q: How is demand in China and will stimulus help?
A: Tim Cook reported China revenue was relatively flat year-over-year, with positive signs like an all-time high installed base and top-selling smartphones. He did not speculate on the impact of China's stimulus plans. -
Services Growth and Mix
Q: Is services growth driven by subscriptions?
A: Luca Maestri stated the recurring portion of services revenue is growing faster than transactional, with over 1 billion paid subscriptions contributing to a $100 billion run rate in services. -
Potential Tariffs Impact
Q: How is Apple preparing for potential tariffs?
A: Tim Cook declined to speculate on potential tariffs and did not provide specific details. -
Cash Deployment Plans
Q: Will excess cash be used for investments or returns?
A: Luca Maestri said they will continue to invest in growing the business but will return excess cash to shareholders, following their fundamental philosophy. -
DOJ Case on Google Deal
Q: Thoughts on DOJ case about Google agreement?
A: Tim Cook declined to comment on the ongoing legal case regarding Google's revenue-sharing agreement. -
AI R&D Spending
Q: Will AI require higher R&D spending?
A: Luca Maestri said they've been investing heavily in R&D, reallocating resources to AI, and increasing intensity in this area.