Strong Earnings Performance Amid iPhone Sales Dip
Apple Inc. (AAPL) exceeded Wall Street’s earnings expectations for its fiscal first quarter, driven by robust growth in its services division, despite a slight decline in iPhone sales. The Cupertino-based tech giant reported earnings of $2.40 per share on revenue of $124.3 billion for the quarter ending December 28, surpassing analysts’ estimates of $2.35 per share. Every year, Apple’s earnings increased by 10%, while sales experienced a 4% rise.
iPhone sales, which contribute significantly to Apple’s overall revenue, witnessed a near 1% decline, totaling $69.14 billion. The iPhone accounted for 55.6% of the company’s total revenue. On a call with analysts, CEO Tim Cook highlighted that iPhone 16 units performed better in markets where Apple Intelligence features were available. However, these features were limited to English-speaking regions and launched later in the quarter. Apple plans to expand language support for these features in April.
Services and Other Product Segments Show Growth
Apple’s services division emerged as a bright spot during the holiday quarter, reaching an all-time high of $26.34 billion in revenue, marking a 13.9% increase. Services now represent 21.2% of Apple’s total revenue, demonstrating the company’s growing reliance on digital offerings.
Apart from services, other Apple product segments exhibited mixed results. Mac computer sales surged by 15.5% to $8.99 billion, and iPad sales climbed 15.2% to $8.09 billion. However, Apple’s Wearables, Home, and Accessories unit experienced a slight decline, with revenue slipping 1.7% to $11.75 billion.
Chief Financial Officer Kevan Parekh emphasized the company’s financial strength, stating, “Our record revenue and strong operating margins drove EPS to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders.” Additionally, he noted that Apple’s active device user base reached a new record across all product categories and geographic segments.
Stock Movement and Future Outlook
Apple’s stock responded positively to the earnings report, rising more than 3% in after-hours trading to reach $245.60. This came after a slight 0.7% drop in regular trading, where the stock closed at $237.59. Apple remains a key player in the technology sector, maintaining its position on the IBD Tech Leaders list.
Despite strong overall performance, Apple’s revenue in China declined by 11.1% to $18.51 billion, with Cook attributing more than half of this drop to channel inventory changes in the region. Looking ahead, Apple has forecasted revenue growth in the low to mid-single digits for the current quarter. However, foreign exchange fluctuations are expected to negatively impact revenue growth by 2.5 percentage points.
Additionally, Apple projected a gross profit margin of 46.5% to 47.5% for its second fiscal quarter, which remains nearly unchanged from the 46.9% reported in the first quarter. As the company navigates changing market dynamics and global economic conditions, investors will closely monitor Apple’s continued expansion in services and its efforts to regain momentum in smartphone sales.
Also read: Apple’s Strategic Shift: The Long Game with In-House Modems
