Apple Q4 Fiscal Year 2024 Earnings Conference Call：Record-Breaking Revenue, Apple Intelligence at the Forefront of Innovation | Moomoo Research

Good afternoon, and welcome to the Apple Q4 Fiscal Year 2024 Earnings Conference Call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded.

Speaking first today are Apple's CEO, Tim Cook; and CFO, Luca Maestri; and they'll be joined by Kevan Parekh, Vice President of Financial Planning and Analysis. After that, we'll open the call to questions from analysts.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook, including the potential impact of macroeconomic conditions on the company's business and results of operations.

These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast.

For more information, please refer to the risk factors discussed in Apple's most recently filed annual report on Form 10-K and the Form 8-K filed with the SEC today, along with the associated press release. Apple assumes no obligation to update any forward-looking statements, which speak only as of the date they are made.

Additionally, today's discussion will refer to certain non-GAAP financial measures.

You can find a reconciliation of these measures in our fourth quarter and full year 2024 earnings release, which is available on our Investor Relations website.

I'd now like to turn the call over to Tim for introductory remarks.

Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple's reporting revenue of $94.9 billion, a September quarter record and up 6% from a year ago. iPhone grew in every geographic segment, marking a new September quarter revenue record for the category, and services set an all-time revenue record, up 12% year-over-year.

We also set September quarter segment revenue records in the Americas, Europe and the rest of Asia Pacific as well as in a large number of countries, including the United States, Brazil, Mexico, France, the U.K., Korea, Malaysia, Thailand, Saudi Arabia and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record.

This has been an extraordinary year of innovation at Apple. We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today. And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant.

Apple Intelligence marks the beginning of a new chapter for Apple Innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with private cloud compute. Earlier this week, we made the first set of Apple Intelligence features available in U.S. English for iPhone, iPad and Mac users with system-wide writing tools that help you refine your writing a more natural and conversational Siri a more intelligent photos app, including the ability to create movies simply by typing a description and new ways to prioritize and stay in the moment with notification summaries and priority messages.

And we look forward to additional intelligence features in December with even more powerful writing tools, a new visual intelligence experience that builds on Apple Intelligence and Chat GPT integration as well as localized English in several countries, including the U.K., Australia and Canada. These features have already been provided to developers and we're getting great feedback. More features will be rolling out in the coming months as well as support for more languages, and this is just the beginning.

Now I'll turn to our results for the quarter, beginning with iPhone. iPhone revenues set a September quarter record of $46.2 billion, up 6% from a year ago with growth in every geographic segment.

With the introduction of Apple Intelligence, we're beginning a new era for iPhone. iPhone 16 powered by A18 is equipped with an incredible new 48 megapixel Fusion camera, fantastic photo experiences and the addition of the action button and camera control. And iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays an industry-leading pro camera system with camera control and studio quality mics, all with a huge leap in battery life.

Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro and M4 Max. From blazing fast performance to Apple's most advanced neural engine [ yet ], our latest chips can easily tackle incredibly complex workflows. And they ensure our newest Macs will be the best personal computers for AI, the instant they hit stores.

With the newest additions to our Mac lineup, customers can choose the MAC that's just right for them. Whether that's iMac, the world's best and most beautiful all-in-one, MacBook Air, the world's most popular laptop now would double the starting memory. MacBookPro, the best Pro notebook anywhere or the incredible Mighty New Mac mini, our first-ever carbon neutral Mac.

iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools and businesses of all sizes. Recently, we were thrilled to introduce the newest iPad Mini featuring an ultracompact design built for Apple intelligence with support for Apple Pencil Pro. It's been a big year for iPad.

iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4 powered iPad Pro.

During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent and sophisticated. It's the thinnest Apple Watch yet, making it more comfortable than ever while offering the biggest, most advanced display.

WatchOS 11 brings some huge new health and fitness insights to users including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition. We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watch in people's lives.

With AirPods 4 we've broken new ground and comfort and designed with our best ever open ear headphones available for the first time with active noise cancellation. And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test and hearing aid features.

These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives. I've already started getting notes from customers calling the experience life changing.

And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short films emerged, which gives people a view into the unique storytelling power made possible by spatial computing.

Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for Vision OS2 as well as applications companies are building to reimagine how they work. Vision Pro continues to inspire awl in its users, and we're just scratching the service of what's possible. And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE.

With Apple TV+ we love celebrating the craft of great storytellers who know how to put on a show. Audiences love to discover new movies like Wolfs, explore a claimed new series like Disclaimer and dive back into returning favorites like Slow Horses and Shrinking. Apple TV+ productions have become fixtures at award shows earning more than 2,300 nominations and more than 500 wins today.

Apple also offers a live sports experience in a league of its own with MLS season pass and subscribers have been cheering on their favorite teams in the MLS Cup playoffs. This month, we also marked 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with their Apple device. Today, users choose Apple Pay for purchases across tens of millions of retailers worldwide. And we're excited to make the Apple Pay experience even better with the option to redeem rewards and access loans from credit cards, debit cards and other lenders right at checkout.

Whenever we celebrate big moments, Apple stores are the best places to share them with customers. I had an incredible time during launch day in September, alongside our team at Apple Fifth Avenue where energy and enthusiasm filled the air. And in stores all over the world, customers are eager to get a closer look at our latest innovations.

We also opened 2 new stores during the quarter, and we can't wait to bring 4 new stores to customers in India.

We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them. In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun.

As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon neutral across our entire footprint by the end of the decade.

As I mentioned earlier, we were thrilled to introduce our first-ever carbon neutral Mac with the latest Mac mini. And in another milestone, customers can choose a carbon-neutral option of any Apple Watch. These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal.

At Apple, across everything we do, we manage for the long term, because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough.

As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come.

Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call.

So I just wanted to take a moment to recognize his extraordinary service as Apple's CFO and to thank him for his partnership. I am deeply grateful. In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from them. I have incredible confidence in our incoming CFO, Kevan Parekh, and we look forward to more of you meeting and working with him going forward.

With that, I'll turn it over to Luca.

Good afternoon, everyone, and thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Cabin is exceptional and I know you will enjoy interacting with him going forward.

Let me now turn to the results for the fourth quarter of our fiscal year.

Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products.

Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories.

During the quarter, we recorded a onetime income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court state aid decision. When we exclude this onetime charge, net income was $25 billion and diluted earnings per share were $1.64, up 12% year-over-year and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record.

Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year and a September quarter record in total and across several markets, including the U.S., the Middle East, Korea and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment.

During the September quarter, many iPhone models were among the top-selling smartphones around the world.

In fact, according to a survey from Kantar, iPhone was the top-selling model in the U.S., Urban China, the U.K., Australia and Japan.

We continue to see high levels of customer satisfaction for the iPhone 15 family with 451 Research recently measuring it at 98% in the U.S.

Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest report from 451 Research, customer satisfaction was 95% in the U.S.

iPad generated $7 billion in revenue, up 8% year-over-year.

In addition to growth in developed markets, we also saw strong performance in many emerging markets with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the U.S.

Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for Watch in the U.S.

Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continued to see strong momentum with the growth of our installed base of active devices, setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our Services offerings. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double digits year-over-year. Paid subscriptions also grew double digits.

We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only 4 years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+.

This past quarter, we celebrated the 5-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row.

Turning to enterprise.

We continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by Apple Care for Enterprise and Apple Professional services with over 10,000 Mac deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees.

We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room.

Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion.

As a result, net cash was $50 billion at the end of the quarter.

During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares.

As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to at the beginning of the call. The color we are providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter.