Apple Q3 2024 Earnings Summary - AI, and Record Sales

$Apple (AAPL.US)$ recent earnings report brings some mixed news, but there's a lot to be optimistic about. Despite a drop in sales in China, they saw better-than-expected iPhone sales for Q3, a surprise on iPads’ sales surge, and it's placing a big bet on artificial intelligence to keep the momentum going.

Positives:

- Revenue and EPS: Revenue grew by 4.9% in Q3, and similar growth is expected in Q4. EPS were $1.40, beating Wall Street's estimate of $1.35. Q3 quarter hit a record revenue of $85.8 billion, a 5% increase y-o-y.

- iPad: Sales surged by 23.7% thanks to new AI-focused models.

- AI Focus: Apple is gearing up for a significant software upgrade, including AI features. The "Apple Intelligence" suite requires at least an iPhone 15 Pro, potentially driving more upgrades.

Negatives:

- iPhone: Sales were down by just 0.9% y-o-y compared to the 2.2% drop analysts predicted, but still can be considered an “overall success”

- Services sales: Revenue rose by 14.1% q-o-q

- China Market: While sales in China fell by 6.5%, it’s a slight improvement from the previous quarter’s 8.1% decline. Apple is combating local competition with discounts and remains optimistic despite economic challenges.

- Operating Expenses: Operating expenses increased by 7% year-over-year, reaching $14.3 billion.

Apple's AI push is a strategic move to stay ahead of competitors like Samsung, Google, and Microsoft, who have been quicker to adopt AI features. With over $100 billion invested in R&D over the past five years, Apple is serious about leading the AI race while maintaining strong profit margins.

The future success hinges on two key factors: keeping AI development costs in check and creating compelling AI-driven features that persuade users to upgrade their devices.

Apple also spent $32 billion on dividends and share repurchases during the quarter, showing strong financial health and commitment to returning value to shareholders.

What do you think about Apple's AI strategy? Will it be enough to overcome the challenges in China and stay ahead of its competitors? Comment down below!