Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide.
While not a current holding in any of the portfolios, Apple is a stock of interest to most investors and therefore warrants an update on the latest earnings, which highlighted solid growth in many key areas but underscores ongoing challenges, particularly in China.
The tech giant posted a 6.1% year-over-year revenue increase to $94.9 billion for its fourth fiscal quarter, slightly surpassing analysts’ projections. However, its China segment saw flat performance, with revenue falling short of the anticipated 4.8% growth, reflecting an ongoing slowdown in the region.
The iPhone, Apple’s flagship product, remains a steady performer, generating $46.2 billion in revenue—a 5.5% increase year-over-year and slightly ahead of estimates. This strong performance across most markets was encouraging, especially as Apple introduced the iPhone 16 in September, which spurred upgrades. The recent launch of Apple Intelligence, Apple’s suite of AI features, also aims to drive future iPhone upgrades, although its rollout was staggered and missed the full impact of the latest product launch. This delay could see younger users and early adopters leading the way in 2025’s upgrade cycle, as more AI features are incorporated into Apple’s devices.
The Services segment continued to be a bright spot, posting a 12% year-over-year growth to $24.97 billion. Apple’s services business, fuelled by an active base of over 2.2 billion devices, contributes high-margin revenue, helping to offset some volatility in product sales. However, this segment came in just below Wall Street’s $25.3 billion projection, attracting investor scrutiny due to its high profitability. On a positive note, the company forecasts that Services growth will persist in the double digits for the December quarter, reinforcing its significance within Apple’s diversified revenue streams.
Apple’s stock buybacks of $25 billion were another highlight, signalling the company’s confidence in its financial stability despite global economic uncertainties and geopolitical risks, especially with its heavy reliance on Chinese manufacturing. These buybacks are part of a broader $95 billion capital deployment strategy, which Apple is expected to sustain in the upcoming quarters.
Apple’s wearables and accessories segment, which includes the Apple Watch and AirPods, experienced a slight decline, reporting $9.04 billion in revenue, down 3% from last year. While Apple introduced modest updates to the Apple Watch Series 10 and AirPods 4, these did not generate significant sales momentum. The Mac and iPad segments also saw mixed results, with the Mac maintaining steady performance at $7.74 billion, while the iPad fell short of projections at $6.95 billion. Apple’s recent updates to these product lines, including new M4 chip integration, should provide a boost in the upcoming holiday season.
Looking ahead, Apple’s revenue projections for the December quarter suggest modest single-digit growth. With new AI functionalities expected, including ChatGPT integration and generative AI image editing, Apple is positioning itself in the growing AI sector. However, there are potential regulatory headwinds, such as the EU’s scrutiny over Apple’s App Store policies, which could impact revenue streams as Apple adapts to allow third-party app stores and payment options.
Despite a mixed report, Apple’s steady investments in AI and smart home technologies, as well as its strategic product upgrades, signal a long-term growth trajectory. While China remains a challenge, Apple’s commitment to delivering high-value services and innovative products underscores its position as a leader in technology.
