Apple’s Q4 Beat Does Not Impress Wall Street As Stock Dips In Premarket

Apple, Inc. ($AAPL) reported better-than-expected fourth-quarter results, with iPhone revenue exceeding expectations and the Services business clocking another record. 

Softer-than-expected Services revenue, a tax charge that dented net income and lukewarm guidance for the key holiday quarter weighed down on the stock.

Apple’s Numbers

Cupertino, California-based Apple reported fourth-quarter non-GAAP earnings per share (EPS) of $1.64 compared to the year-ago’s $1.36 and the consensus of $1.60.

The 2024 fourth-quarter adjusted EPS excluded a one-time charge related to the impact of the reversal of the European General Court’s State Aid decision. The company had to pay a $10.2 billion one-time tax charge to settle a longstanding case in Europe over how it handled taxes in Ireland. On account of this, reported net income fell sharply from $22.96 billion a year ago to $14.74 billion.

Apple reported record September quarter revenue of $94.9 billion, slightly ahead of the $94.52 billion consensus. The top-line grew 6.03% year-over-year (YoY) and 10.61% sequentially. The company previously guided to a more modest 4.9% YoY growth.

Luca Maestri, Apple’s CFO, said, “Our record business performance during the September quarter drove nearly $27 billion in operating cash flow, allowing us to return over $29 billion to our shareholders.”

The executive noted that Apple’s active installed base of devices reached an all-time high across products and geographies. 

The board declared a cash dividend of $0.25 per share, payable on Nov. 11, to shareholders of record as of Oct. 31.

Segmental Breakdown

Revenue from Apple’s flagship product, the iPhone, came in at $46.22 billion versus the consensus of $45.06 billion, thanks to the 5.52% growth. 

Wedbush analyst Daniel Ives said the iPhone 16 upgrade cycle showed initial success out of the gates. The analyst estimates that 80% of the iPhone demand came from the Pro and Pro Max iPhone 16 models versus the 65% seen historically during iPhone launches.

The Services business reported another record revenue performance with a $24.97 billion contribution. The segment’s revenue grew about 12% but missed the $25.25-billion Wall Street’s forecasts

Ives termed the segment’s growth as impressive, with the business now chugging along with a $100 billion annual revenue run-rate.

iPad and Mac revenue came in at $7.74 billion and $6.95 billion, slightly shy of the consensus estimate of $7.83 billion and $7.12 billion, respectively. Wearables, home and accessories revenue fell YoY to $9.04 billion and missed the consensus of $9.16 billion.

Geography-wise, Americas’ revenue grew 3.86% to $41.66 billion, accounting for 49% of the total revenue. All the other regions, except Greater China, also reported sales growth. The Greater China region, comprising mainland China, Hong Kong, Taiwan and Macau saw a slight YoY dip in revenue from $15.08 billion to $15.03 billion.

Ives sees the China revenue growing by high single-digits and potentially double-digits, as the iPhone 16 cycle plays out in this core region and AI is likely to hit in April.”

On the conference call, Apple guided December quarter revenue growth in the low- to mid-single digits YoY and Services revenue to grow double digits, at a similar rate reported for fiscal year 2024. 

The company guided to gross margins of 46%-47%.

Wedbush’s Ives noted that the consensus calls for 7% overall revenue growth for the quarter. iPhone revenue growth will likely be in line with the consensus estimate of 5% growth, he said.

The analyst termed the quarter as “rock solid.” “The step by step rollout of Apple Intelligence will result in a strong December quarter but will also flow into the March and June quarters which should be good news for FY25,” he added.

Wedbush maintained an “Outperform” rating and $300 price target for the stock.

Retailers were largely bullish on Apple notwithstanding the negative stock move. A user on Stocktwits advocated holding the stock and said downturn is worth buying.

Another said next all-time high is loading.

As of 6:58 am ET, Apple shares fell 1.07% to $223.49.

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