Apple, facing persistent concerns about sluggish sales in China and nervous anticipation about the launch of its Vision Pro headset, reported Thursday that its fiscal first quarter 2024 revenue rose 2% on the strength of global iPhone sales.
The tech giant topped analysts estimates for revenue and earnings per share in the quarter, which ended on Dec. 31 and was composed of 13 weeks as opposed to the fourth quarter of 2023, which was composed of 14 weeks. After hours on Thursday, the company’s stock fell roughly 3%.
Here are the top-line results:
Net Income: $33.92 billion, up 13% from the year-ago period.
Earnings per share: $2.18, compared to $2.09 per share expected by Zacks Investment Research
Revenue: $119.6 billion, compared to $117.62 billion expected by Zacks Investment Research
Apple CEO Tim Cook attributed the boost in revenue growth to iPhone sales and “all-time revenue record” in its services segment, which includes Apple TV+ and Apple Music. He said that Apple’s installed base of active devices surpassed 2.2 billion, reaching an “all-time high across all products and geographic segments.”
On Friday Apple is scheduled to launch the Vision Pro headset, the latest Apple product. The headset, which is currently priced at $3,499 for the base model, will be available for purchase in the U.S. on Friday with buying options for consumers in other countries and territories to come.
This quarter also saw an all-time record in earnings-per-share of $2.18, up 16 percent from last year, which the company credited to December’s performance as well as margin expansions on Apple’s products and services. During this quarter, the company was also able to return “almost $27 billion” to shareholders in dividends.
Apple set revenue records across more than two dozen countries and regions during the quarter, including all-time records in Europe and rest of Asia Pacific. Emerging markets in Malaysia, Mexico, the Philippines, Poland and Turkey also saw double digit growth during this time, the company said.
Apple also saw an all-time record in paid subscriptions, which grew by double digits year over year. In services the company set an all-time net sales record of $23.1 billion, which marked 11% year over year increase. The segment made up 19% of Apple’s total sales for the quarter.
“We are confident in our future, and continue to make significant investments across our business to support our long-term growth plans,” Apple CFO Luca Maestri said in the shareholder letter.
Breaking down how Apple’s major devices performed, net sales for the iPhone came in at $69.7 billion, a 6% increase. That was followed by net sales for Mac, which came in at $7.8 billion, a 1% increase.
The iPad and Apple Watch did not fare as well. Net sales for iPads came in at $7 billion, a 25% decrease compared to this time period last year. This decrease was credited to the fact that the iPad Pro and the 10th generation iPad were released in late 2022, boosting sales in the product for that quarter.
Revenue for wearables, home and accessories was also down compared to the first quarter of 2023, coming in at $12 billion, which marked a 11% drop. This was also credited to a difficult comparable year.
There’s another reason why net sales around wearables may be down. In late 2023, both the Apple Watch Series 9 and Watch Ultra 2 were banned in the U.S. due to a patent dispute with the medical device maker Masimo. The ban was temporarily lifted in late December but not before it impacted the sale of one of Apple’s biggest and newest products during one of the most consumerism-heavy times of the year. A new version of the products that did not include the legally disputed tech were made available for purchase on Jan. 18. Apple is no longer allowed to sell the previous versions.
Apple’s concerns in China
Though Cook and Maestri naturally tried to stay focused on the company’s records and regional wins, one topic kept cropping up during the first quarter earnings call: China.
In January, three investment firms — Barclays, Piper Sandler and Redburn Atlantic — downgraded the company’s stock. Redburn Atlantic’s James Cordwell and Piper Sandler’s Harsh Kumar lowered the stock to Neutral, while Barclays’ Tim Long bumped Apple from Equal Weight to Underweight.
Driving much of analysts’ concerns were fears that the iPhone 15 is underperforming in China. According to Bloomberg, sales of the iPhone 15 in the country during its launch month were 6% lower than sales of the iPhone 14 during the same time period. Adding to the strain, Apple is facing some serious competition in the region. The Mate 60 Pro smartphone, made by Chinese company Huawei, was released in China weeks before the iPhone 15 and has been a massive hit, selling 1.5 million units in a month.
When asked how the company is thinking about the iPhone 15 cycle in the wake of its performance in China, Cook pointed out that net sales for the iPhone were up 6% overall during the quarter, and noted the company’s gains in emerging markets in both Latin America and the Middle East.
“Over the same period of time, iPhone 15 is outselling iPhone 14,” Cook said during the first quarter earnings call.
The CEO also emphasized that the company was only down in the single digits on iPhone sales in China and that there were multiple factors that led to the decrease in the region. He also said that Apple saw “solid growth” year over year when it came to upgraders in mainland China and that the company had four of the top six smartphone models in urban China.
“We’ve been in China for 30 years,” Cook added later in the call. “I remain very optimistic about China in the long term.”
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