Originally published at: Apple Sets Q4 2024 Revenue Record on Services and iPhone Growth - TidBITS
Reporting on its Q4 2024 financial results, Apple has announced profits of $14.7 billion ($9.97 per diluted share) on revenues of $94.9 billion. The company’s revenues are up 6% compared to the year-ago quarter, which marks yet another record for the September quarter (see “Apple Reports Record Q4 2023 Profits Despite 1% Revenue Drop,” 3 November 2023). The quarter could have been even better, but Apple took a one-time charge of $10.2 billion to comply with an EU tax ruling.
Apple continues to make the bulk of its money from the iPhone, with Services becoming ever more important. The two combine for 75% of the company’s revenue. The remaining 25% comes from Wearables, Mac, and iPad, with the Mac losing a percentage point in the mix despite posting a slight year-over-year revenue increase. We’ll be watching to see if Apple’s M4 Mac releases this week boost the segment’s importance next quarter.
In a familiar earnings call trope, Apple said that the installed base of each product segment reached an all-time high. That seems almost inevitable, given that ever-increasing sales mean that more new devices are put into circulation every quarter than are likely to leave service due to damage or age. But it sounds good!
Apple CEO Tim Cook emphasized the importance of Apple Intelligence throughout, calling it “a new era for iPhone,” “a new chapter for our products,” and “a compelling upgrade reason.” At the moment, however, minimal data supports his claims. The most he could point to is that the just-released iOS 18.1 (see “Apple Intelligence Arrives in macOS 15.1 Sequoia, iOS 18.1, and iPadOS 18.1,” 28 October 2024) has twice the adoption rate of iOS 17.1. However, that’s not surprising given that iOS 17.1’s main new feature was AirDrop transfers switching to the Internet if needed—nice, but we doubt many people have even noticed it (see “Apple Releases iOS 17.1, iPadOS 17.1, macOS 14.1 Sonoma, watchOS 10.1, tvOS 17.1, and HomePod Software 17.1,” 25 October 2023).
Frankly, we don’t feel that the initial Apple Intelligence features are sufficiently compelling to recommend upgrading for them. However, with the staged rollout of Apple Intelligence, Apple has cleverly created a situation where its constant promotion of Apple Intelligence as the next big thing will likely help customers perceive it as essential and increase upgrade momentum over the coming year. Also, remember that Apple Intelligence isn’t yet globally available. In December, its features will roll out in localized English to several more countries, including Australia, Canada, and the UK. Cook said support for more languages will appear in April 2025.
Finally, this was the last call for Apple CFO Luca Maestri. As Apple announced in August, Maestri will be stepping down as CFO while continuing to lead Apple’s Corporate Services teams, including information systems and technology, information security, and real estate and development. As part of a planned succession, Kevan Parekh, Apple’s Vice President of Financial Planning and Analysis, will take over the CFO role. The details may be irrelevant to everyday Apple users, but they show that Apple is run by serious adults who plan out things like corporate succession—unlike other tech companies we could name.
iPhone
Apple’s iPhones, sales of which make up almost half of Apple’s revenues, posted a 6% increase year-over-year, a revenue record, despite many analysts’ worries over rumors of spotty sales. Even though the iPhone 16 is largely an evolutionary upgrade, it has proven popular. It’s difficult to attribute this to Apple Intelligence, given that none of those features were available during the quarter, but perhaps Apple’s marketing created forward-looking demand.
Our take in “iPhone 16 Models Add Camera Control, Prep for Apple Intelligence” (9 September 2024) was that the iPhone 16 and iPhone 16 Plus were easier to recommend than the iPhone 16 Pro and iPhone 16 Pro Max. An analyst tried to elicit details on the split between the consumer and pro models, but Cook demurred, saying only that Apple had been constrained in October on the pro models, so it was too early to tell.
Mac
The Mac segment posted a 2% revenue increase from a year ago, which Apple attributed to strong sales of the MacBook Air. That makes sense, given the popularity of the MacBook Air among students. Apple expects increased Mac sales in the current quarter, sparked by the releases of the new M4-based MacBook Pro, Mac mini, and iMac. These machines are all sufficiently compelling that sales records seem plausible, especially for the MacBook Pro and Mac mini, both of which never saw M3 upgrades like the MacBook Air and iMac.
iPad
The iPad posted an 8% year-over-year revenue increase, driven by the May releases of new iPad Pro and iPad Air models, and probably boosted by strong sales to students. The recent release of the seventh-generation iPad mini to support Apple Intelligence may help increase revenues next quarter (see “Apple Unveils Seventh-Generation iPad mini with A17 Pro and Apple Pencil Pro Compatibility,” 15 October 2024).
The big question is when Apple will finish the lineup by updating the standard iPad to support Apple Intelligence. It’s surprising that Apple didn’t update it at the same time as the iPad mini to be ready for the holiday shopping season. However, incorporating an A17 Pro chip and additional memory might make it challenging to keep the iPad’s price at $349 while maintaining its profit margins.
Wearables
Wearables was the one product category that showed a year-over-year revenue decrease, bringing in 3% lower revenues than last year. Cook spent some time discussing enterprise and developer enthusiasm for Apple’s costly Vision Pro headsets but did not mention the headset’s revenues.
We think Wearables revenues may bounce back next quarter thanks to the hearing aid features of the AirPods Pro 2 that just became available (see “Apple Releases AirPods 4, Adds Hearing Aid Mode to AirPods Pro 2,” 12 September 2024). Cook said he’s receiving email from users praising the feature, and we’ve heard from people who plan to buy AirPods Pro purely for that feature. Similarly, the Apple Watch’s new capability to detect sleep apnea may drive more sales (see “Apple Watch Series 10 Slims Down, Apple Watch Ultra 2 Gains Black Finish,” 9 September 2024).
Services
The Services category continues to be a big moneymaker for Apple, posting a 12% revenue gain over last year. Impressively, the category enjoys a 74% profit margin. Apple said that paid accounts and subscriptions saw double-digit growth year over year, with the number of subscriptions doubling from four years ago. Maestri noted that subscriptions, which provide recurring revenue, grew faster than transactional service sales (such as books and music). Between Apple and third parties, Apple now manages over one billion subscriptions.
Regional
Sales in Greater China were just slightly below the year-ago quarter, but all of Apple’s other geographic regions showed increases. The Asia Pacific region led the pack with revenues of $7.4 billion compared with last year’s $6.3 billion, an increase of nearly 17%. Sales in India, an important emerging market for Apple, also set an all-time revenue record. Europe also performed well, with 11% growth, and Japan posted almost 8% growth.
Although the results from Greater China weren’t good, Cook said that the situation in China had improved regarding the foreign exchange rate headwinds that had been dragging down revenues all year.
Cautious Predictions of Growth
For next quarter’s report, Apple predicts that most of its segments’ revenues will continue to grow by single-digit percentages, with Services revenue again reaching double-digit growth. Given Apple’s roster of recently refreshed products across its entire line, this prediction seems cautious and easily achievable.
Nonetheless, the company has a lot of work left to do in its rollout of Apple Intelligence features and their international availability. Future revenue growth may well depend on how quickly new and improved Apple Intelligence features arrive, how well they work, and how popular they prove with users. Perhaps we should ask ChatGPT what it thinks of Apple’s chances!