Did Apple Outperform Expectations In Its Latest Q4 FY2024 Results?

TradingKey - In a week of Big Tech earnings in the US, many investors were eagerly awaiting the turn of Apple Inc (NASDAQ: AAPL). That’s mainly down to the fact that the iPhone maker has recently released its latest iPhone 16 series of smartphones.

Investors wanted to hear updates on both initial sales performance following the launch, updates on its newly-released Apple Intelligence tools and management’s projections for sales heading into the critical holiday quarter (Q4 2024). 

Tech investors got a chance to see how the overall business was performing as Apple reported its Q4 FY2024 earnings – for the three months ending 30 September 2024 – on Thursday (31 October) after the market closed.

Shares of Apple dropped around 2% in after-hours trading following the earnings release and this share price reaction was down to a number of factors in the report.

Underwhelming revenue guidance, China drags

For the company’s Q4 FY2024 period, Apple posted revenue of US$94.1 billion which was an increase of 6% year-on-year. This was also broadly in line with average analysts’ estimate of US$94.4 billion. 

Apple’s newest blockbuster device (iPhone 16) came out on 20 September and, while there was only a week’s worth of sales, Apple CEO Tim Cook did say that “sales of the iPhone 16 was stronger than 15”. In terms revenue for the period, the iPhone saw sales of US$46.22 billion – up 5.5% year-on-year – which came in slightly ahead of estimates of US$45.47 billion.

Apple quarterly net sales, Q1 FY2021 – Q4 FY2024 (year-on-year % change)

Sources: CNBC, company filings

It was guidance that disappointed investors, though. Apple’s management said on its earnings call that it expects “low to mid-single digit” sales growth in the current quarter (up to 31 December 2024) and also indicated that it expects Services growth to be the same as for the past year – which has been 12.9%. While its Services division did post record revenue of US$25 billion for the quarter, this came in slightly below expectations.

China turned out to be another drag for the iPhone giant during the quarter as revenue from Greater China fell slightly year-on-year to US$15 billion. CEO Cook did say that iPhone sales grew in every geographic market during the quarter, suggesting the company’s lineup of other products isn’t performing as well as investors would hope in China.

Lineup refresh planned

While Apple’s iPhone inevitably steals the headlines, the company’s other products still make up a significant amount of revenue. For its Macs, Apple generated US$7.74 billion in revenue which was in line with expectations. 

Earlier this week, according to Bloomberg, the company added a more advanced M4 chip to its iMac, Mac mini, and MacBook Pro products – that should set it up well for the holiday quarter when sales of electronic devices are typically higher.

Meanwhile, Apple’s iPad division saw sales of US$6.95 billion, coming in marginally below expectations. While it hasn’t refreshed the lineup that regularly, the company did revamp the iPad Pro with an M4 chip earlier this year. It also plans to release and roll out new lower-end models of the iPad in the first half of 2025, aimed at students.

Overall, the outlook from Apple was rather underwhelming for investors which was why shares fell in after-hours trading. The company is also battling to put out fires on legal fronts, including over its tax affairs in the EU.

Investors will be closely monitoring how sales fare in China, its third-largest market, in the following quarters while any notable updates on the biggest Apple Intelligence features – which are due to roll out over the next few months – will also be watched.