Apple: App Store Shenanigans
And a look at the reception of the Vision Pro
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CEO Tim Cook dropped an AI teaser during Apple's latest earnings call:
“We've got some things that we are incredibly excited about that we'll be talking about later this year. […] I think there's a huge opportunity for Apple with GenAI and AI.”
What do you expect? I would be shocked if the next iPhone Pro models weren’t marketed as some form of AI-enabled device.
Today, we continue our grand tour of the ‘Magnificent Seven’ earnings with Apple. NVIDIA reports tomorrow, so stay tuned for our deep dive on Friday!
Apple is going through a rough patch, as illustrated by Microsoft taking over as the world’s most valuable company in January. In addition, Apple is facing criticism for its new App Store policies.
Yet, AAPL recently returned to our review of quarterly top picks from hedge funds, illustrating that the lower entry point has become attractive to some money managers.
Today at a glance:
Apple’s Q1 FY24.
App Store Shenanigans.
Key quotes from the earnings call.
What to watch looking forward.
1. Apple Q1 FY24
Apple ends its fiscal year in September, so Q1 FY24 ended in December.
Income statement:
Here is the bird’s-eye view of the income statement.
Revenue grew 2% Y/Y to $120 billion ($1.3 billion beat).
Products (81% of overall revenue) were flat Y/Y.
📱 iPhone (58% of total revenue) grew +6% Y/Y.
💻 Mac (7% of total) rose by 1% Y/Y.
🖊 iPad (6% of total) dropped -25% Y/Y.
⌚️ Wearables (10% of total) fell -11% Y/Y.
Services (19% of overall revenue) grew +11% Y/Y.
It includes the App Store, Apple Music, Apple Pay, AppleCare, Apple TV+, Apple Arcade, Apple Fitness+, iCloud+, and more. They also include that juicy annual payment from Google to remain the default search engine on Apple devices (estimated at $20 billion per year).
The growth Y/Y was misleading for all segments; we’ll get to that in a second.
Here’s a breakdown of Apple’s quarterly revenue in the past five years. While hardware revenue follows the ebb and flow of new product releases, the Services segment has grown consistently. Remember, Q1 is the holiday quarter for Apple (ending in December), so it usually sees a surge in iPhone revenue with new launches.