Apple's Third Quarter Revenue Up 4.9% Year-Over-Year, iPhone Sales Decline Slightly But Beat Expectations

Apple's Third Quarter Revenue Up 4.9% Year-Over-Year, iPhone Sales Decline Slightly But Beat ExpectationsAfter the US market closed on Thursday, Apple announced its financial results for the third quarter of fiscal year 2024, ending June 29

Apple's Third Quarter Revenue Up 4.9% Year-Over-Year, iPhone Sales Decline Slightly But Beat Expectations

After the US market closed on Thursday, Apple announced its financial results for the third quarter of fiscal year 2024, ending June 29. The report revealed that the company's revenue reached $85.77 billion, representing a 4.9% year-over-year increase and exceeding analysts' expectations of $84.53 billion. Net income reached $21.45 billion, marking a 7.9% year-over-year rise. Earnings per share amounted to $1.40, surpassing analyst estimates of $1.35. Despite exceeding investor expectations, Apple's stock price dipped marginally by less than 1% during after-hours trading.

The standout performance in Apple's third quarter was driven by robust growth in its services segment and a surge in iPad sales. Services revenue reached $24.21 billion, marking a 14.1% year-over-year increase and exceeding analyst expectations of $24.01 billion, solidifying its position as one of Apple's most significant growth drivers. iPad sales surged by nearly 24% year-over-year, reaching $7.16 billion, fueled by a wave of upgrades driven by the launch of new iPad models.

While iPhone revenue declined slightly by 0.9% year-over-year, falling short of analysts' expectations of a 2.2% decline, this was primarily attributed to a rebound in iPhone demand ahead of the official rollout of AI features. Apple CEO Tim Cook stated, "On a constant-currency basis, our results actually grew. This is how we look at it from an operational perspective." CFO Luca Maestri highlighted that iPhone performance surpassed expectations from the previous quarter, asserting that the iPhone 15 series has outperformed the previous iPhone 14 generation since its launch.

Analysts anticipate a robust upgrade cycle with the introduction of the iPhone 16 series in September. The company unveiled a suite of AI products and services known as Apple Intelligence at its June developer conference, requiring users to possess at least an iPhone 15 Pro for access. This could potentially induce consumers to upgrade their devices.

Although Apple trails competitors like Samsung Electronics in the rollout of AI features, and companies like Microsoft and Google have made substantial investments in AI, Cook emphasized that despite the unclear direct impact of Apple Intelligence on revenue, the company is already increasing spending on its launch. Apple began increasing research and development expenses last year, exceeding $100 billion in R&D investment over the past five years. Maestri indicated that while developing and operating AI applications often entails high costs, the company maintains "very strong gross margins." Cook remarked, "We've moved many people who were working on other things over to AI projects."

Apple's Mac revenue for the third quarter reached $7.01 billion, representing an approximate 2% increase compared to the same period last year. Wearables, Home, and Accessories sales experienced a decline of 2.3% year-over-year. Cook highlighted that as many as two-thirds of Apple Watch users are first-time buyers, showcasing significant growth in the user base.

Regionally, Apple's Americas segment generated $37.68 billion in revenue, reflecting a 6.5% year-over-year increase. The Europe segment, encompassing India, the Middle East, and Africa, recorded $21.88 billion in revenue, registering an 8.3% year-over-year growth. Revenue from Greater China reached $14.73 billion, marking a 6.5% decline year-over-year. The Japan segment generated $5.1 billion in revenue, representing a 5.7% increase year-over-year. Revenue from the Rest of Asia Pacific reached $6.39 billion, signifying a 13.5% growth year-over-year.

Apple projects revenue growth for the fourth quarter of fiscal year 2024 to align with the third quarter, around 5%. The company also anticipates the services business to maintain a growth rate similar to the first three quarters, approximately 14%. Operating expenses for the fourth quarter are projected to range from $14.2 billion to $14.4 billion, with gross margins anticipated to fall between 45.5% and 46.5%.

Despite the 6.5% year-over-year decline in revenue from Greater China in the second quarter, Cook asserted that iPhone installations in Greater China have actually hit record levels. He pointed out that the top three bestselling smartphones in Chinese cities are iPhones, indicating that the company's performance in the Chinese market has outpaced the previous two quarters. Maestri added that excluding currency fluctuations, revenue in Greater China declined by less than 3% year-over-year.

Apple's third-quarter gross margin reached 46.3%, slightly surpassing the average analyst expectation of 46.1%. The company maintained its dividend at $0.25 per share. Apple disclosed that it spent $32 billion on dividend payments and share buybacks during the third quarter.

Overall, Apple's third-quarter results outperformed market expectations, demonstrating the company's sustained strong growth trajectory amidst economic challenges and intensifying competition. While iPhone sales experienced a minor decline, the robust growth in services and iPad sales provided new avenues for growth. Apple's investment in AI underscores the company's proactive embrace of the future, positioning itself for the next phase of growth.

A detailed analysis of Apple's third-quarter financial report is provided below:

Revenue

• Third-quarter revenue reached $85.77 billion, marking a 4.9% year-over-year increase, surpassing analyst expectations of $84.53 billion.

• Services revenue reached $24.21 billion, signifying a 14.1% year-over-year increase, exceeding analyst expectations of $24.01 billion, solidifying its position as one of Apple's most significant growth drivers.

• iPad sales surged by nearly 24% year-over-year, reaching $7.16 billion, fueled by a wave of upgrades driven by the launch of new iPad models.

• iPhone revenue declined slightly by 0.9% year-over-year, falling short of analysts' expectations of a 2.2% decline, primarily attributed to a rebound in iPhone demand ahead of the official rollout of AI features.

• Mac revenue reached $7.01 billion, representing an approximate 2% increase compared to the same period last year.

• Wearables, Home, and Accessories sales experienced a decline of 2.3% year-over-year.

Profit

• Net income reached $21.45 billion, marking a 7.9% year-over-year rise.

• Earnings per share amounted to $1.40, surpassing analyst estimates of $1.35.

Region

• Americas segment generated $37.68 billion in revenue, reflecting a 6.5% year-over-year increase.

• The Europe segment, encompassing India, the Middle East, and Africa, recorded $21.88 billion in revenue, registering an 8.3% year-over-year growth.

• Revenue from Greater China reached $14.73 billion, marking a 6.5% decline year-over-year.

• The Japan segment generated $5.1 billion in revenue, representing a 5.7% increase year-over-year.

• Revenue from the Rest of Asia Pacific reached $6.39 billion, signifying a 13.5% growth year-over-year.

Outlook

• Apple projects revenue growth for the fourth quarter of fiscal year 2024 to align with the third quarter, around 5%.

• The company also anticipates the services business to maintain a growth rate similar to the first three quarters, approximately 14%.

• Operating expenses for the fourth quarter are projected to range from $14.2 billion to $14.4 billion, with gross margins anticipated to fall between 45.5% and 46.5%.

Other Key Information

• Apple's third-quarter gross margin reached 46.3%, slightly surpassing the average analyst expectation of 46.1%.

• The company maintained its dividend at $0.25 per share.

• Apple disclosed that it spent $32 billion on dividend payments and share buybacks during the third quarter.

• Apple's third-quarter results demonstrate the company's sustained strong growth trajectory amidst economic challenges and intensifying competition.

• While iPhone sales experienced a minor decline, the robust growth in services and iPad sales provided new avenues for growth.

• Apple's investment in AI underscores the company's proactive embrace of the future, positioning itself for the next phase of growth.

Conclusion

Apple's third-quarter financial report showcases the company's performance exceeding market expectations and maintaining a robust growth trajectory. The substantial growth in services and iPad sales provides new avenues for expansion, while Apple's commitment to AI highlights the company's proactive approach to the future, positioning itself for