Apple Earnings Review: Apple Intelligence Begins to Receive Positive Feedback

Apple's fiscal fourth-quarter earnings surpassed Wall Street's expectations in terms of revenue and earnings per share, although net income declined due to a one-time charge related to a tax ruling in Europe.

In the September quarter, Apple's revenue reached a record $94.9 billion, marking a 6% increase year over year. iPhone sales also set a September quarter record with revenues of $46.2 billion, up 6% from the previous year. Mac revenue saw a more modest increase of 2%, totaling $7.7 billion, while iPad revenue grew by 8% to $7 billion. Conversely, revenue from Wearables, Home, and Accessories experienced a slight decline of 3%, coming in at $9 billion.

The Services sector, however, achieved an all-time high with $25 billion in revenue, an increase of 12% year over year. Gross margin was robust at 46.2%, near the top of the guidance range, with a product gross margin of 36.3% and a services gross margin maintaining at 74%.

Operating expenses rose by 6% to $14.3 billion. The net income, excluding a one-time tax charge, stood at $25 billion, and diluted earnings per share increased by 12% to $1.64.

The company recorded a one-time income tax charge of $10.2 billion related to the reversal of a European General Court decision. Impacted by tax charge, net profit was $14.736 billion, down 36% year-over-year.

Looking at sales by region for the third quarter, net sales in the Americas were $41.66 billion, up 3.9% year-over-year. In Europe, net sales reached $24.92 billion, a rise of 11%. In Greater China, net sales were $15.03 billion, a slight decrease of 0.3% year-over-year, against expectations of $15.8 billion. Japan reported net sales of $5.93 billion, increasing by 7.6%. Other Asia Pacific regions saw net sales of $7.38 billion, marking a substantial growth of 16.6%.

During the earnings call, Apple's Chief Financial Officer Luca Maestri indicated that the company expects to see "mid to low single-digit" (1% to 5%) revenue growth in the first fiscal quarter ending in December (Q4 2024). Analysts had previously forecasted a revenue increase of 6.65% to $127.53 billion for the quarter.

Following the earnings report, Apple's stock price, which closed down 1.8%, continued to decline in after-hours trading, falling over 1.7%.

▶ The initial feedback for Apple Intelligence has been positive

Tim Cook stated that this Monday, Apple officially launched the Apple Intelligence feature for iPhone, iPad, and Mac in the U.S. region. Currently, Apple Intelligence includes a range of supports such as a system-wide writing tool that helps users optimize text input to enhance writing quality; a more natural voice assistant, Siri; smarter photo management tools; a video tool that creates movies from input descriptions; and intelligent recognition and generation of app notification summaries to help users capture key information, among others.

He said Apple has received a lot of positive feedback from developers and users. Data from the first three days shows that the update rate for iOS 18.1 since this Monday is twice that of the same period last year for iOS 17.1, demonstrating a strong interest in Apple Intelligence. Apple plans to introduce more features to users in December, including but not limited to enhanced writing tools and visual intelligence experiences integrated with Apple Intelligence and ChatGPT. Additionally, Apple Intelligence will also officially roll out to users in multiple countries and regions, including the UK, Australia, and Canada at that time.

Tim Cook futher stated that entering 2025, Apple Intelligence will be launched in more non-English-speaking countries and regions, supporting more languages. Starting from April next year, Apple will also introduce more features for Apple Intelligence.

In terms of Apple's operation of data centers, Luca Maestri stated that Apple adopts a hybrid approach. In some cases, Apple utilizes its own data centers; in others, it employs third-party data centers. As a result, Maestri noted that capital expenditure may not be comparable to past data. With the launch and rollout of new features such as Apple Intelligence, the company will provide the necessary computing support for these new functions.