Apple reported fiscal first-quarter earnings on Thursday that surpassed expectations, with revenue soaring 16% on an annual basis.
Shares of the company were up as much as 3% in extended trading.
Here are the results versus what Wall Street was expecting according to LSEG consensus estimates for the quarter ending in December:
- EPS: $2.84 vs. $2.67 estimated
- Revenue: $143.76 billion vs. $138.48 billion estimated
Here is how Apple’s major product lines did versus LSEG consensus estimates:
- iPhone revenue: $85.27 billion vs. $78.65 billion estimated
- Mac revenue: $8.39 billion vs. $8.95 billion estimated
- iPad revenue: $8.60 billion vs. $8.13 billion estimated
- Wearables, Home, and Accessories revenue: $11.49 billion vs. $12.04 billion estimated
- Services revenue: $30.01 billion vs. $30.07 billion estimated
- Gross margin: 48.2% vs. 47.5% estimated
Finance chief Kevan Parekh said that Apple expected March quarter revenue to rise between 13% and 16% on an annual basis, which would be equivalent to between $107.8 billion and $110.66 billion. Analysts polled by LSEG are expecting $104.84 billion in second-quarter revenue. Apple said it expected constrained iPhone supply during the quarter.
Apple also said it expected its Services to have a year-over-year growth rate similar to the 14% in the December quarter.
The company reported $42.10 billion in net income, or $2.84 per diluted share, versus $36.33 billion, or $2.40 per diluted share, in the year-ago period.
Overall iPhone revenue surged 23% on an annual basis to $85.27 billion in revenue, which the company attributed to strong sales of the iPhone 17 models, which were released in September.
“The demand for iPhone was just simply staggering,” Apple CEO Tim Cook told CNBC’s Steve Kovach.
The strong growth is a reversal from the holiday quarter last year, when Apple reported iPhone sales that declined slightly.
Cook said Apple now has an active base of 2.5 billion iPhones, Macs and other Apple devices in use, up from 2.35 billion announced in January last year. That number is closely watched because it signals how big the addressable market is for Apple’s services, as well as for software on the company’s platforms.
Apple saw particularly strong results in China, including Taiwan and Hong Kong. Sales in the region surged 38% during the quarter to $25.53 billion. Cook said that the performance in the region was driven by iPhone sales.
“We set an all-time record for upgraders in mainland China, and we saw double digit growth on switchers,” Cook said. Upgraders refers to current iPhone users who bought newer models, and switchers means new customers who previously had phones from different brands.
In China, Apple “saw a lift that, frankly, was much greater than we thought we would see,” Cook said, adding that it was “product-driven.”
Apple’s sales of Mac laptops came up short of Wall Street expectations, and fell 7% on an annual basis. The company released an updated MacBook Pro laptop with a new M4 chip in November.
The iPad business grew 6% in the quarter on an annual basis to $8.6 billion in revenue, beating expectations. Cook said that half of the people who bought an iPad during the quarter had not previously owned one.
Apple reports AirPods, Apple Watch, Vision Pro and other accessories in a category called Wearables, Home and Accessories. Those sales fell 2% on an annual basis, and missed Wall Street estimates.
Apple’s services business includes subscriptions such as Apple TV and iCloud as well as advertising revenue from licensing agreements with Google, AppleCare warranties and other offerings. It grew 14% on an annual basis to $26.34 billion in sales. Cook said Apple TV’s viewership rose 36% in December on an annual basis.
Earlier this month, the company announced it would partner with Google to use its Gemini AI model to power Apple Intelligence software. Apple has spent much less on artificial intelligence technology than its peers, such as Meta and Microsoft, which have committed to spending hundreds of billions on AI infrastructure.
“We have absolutely the best platforms in the world for AI,” Cook said.
Apple spent $2.37 billion on capital expenditures during the quarter, down from $2.94 billion in the same period last year. But research and development expenses increased to $10.89 billion from $8.27 billion in the year-ago period.
“AI is going to require incremental investment on top of our normal product roadmap investment,” Parekh said.
All of Apple’s devices, including the iPhone, Mac and iPad use a lot of storage and memory, raising questions about how the company plans to handle increased component costs as memory prices around the world are surging because of an AI-related shortage.
“We’re in a supply chain mode to meet the very high levels of customer demand we’re currently constrained,” Cook said. “At this point, it’s difficult to predict when supply and demand will balance.”
Cook added that one of the constraints was with the advanced chip manufacturing needed for Apple’s processors. He also said that memory prices had a minimal impact during the quarter, but the company expects a bigger effect during the current quarter.
“We do continue to see market pricing for memory increasing significantly,” Cook said.
Parekh said that Apple spent nearly $32 billion in the quarter on share repurchases and dividends.
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