Apple Reports Strong Earnings: iPhone 15 Sales Soar, Apple Intelligence Prepares for Launch, and Services Continue to Grow

Apple Reports Strong Earnings: iPhone 15 Sales Soar, Apple Intelligence Prepares for Launch, and Services Continue to GrowOn August 2, 2024, Thursday, Apple Inc. announced its financial results for the third quarter of fiscal year 2024 and held a conference call to discuss the results

Apple Reports Strong Earnings: iPhone 15 Sales Soar, Apple Intelligence Prepares for Launch, and Services Continue to Grow

On August 2, 2024, Thursday, Apple Inc. announced its financial results for the third quarter of fiscal year 2024 and held a conference call to discuss the results. Despite a slight revenue decline to $39.3 billion, down 1% year-over-year, the company reported actual annual growth in constant currency terms. Apple CEO Tim Cook and CFO Luca Maestri explained the strong performance, highlighting the surge in iPad sales, the continued growth of services, and the latest developments in Apples much-anticipated artificial intelligence initiative, Apple Intelligence.

Strong iPhone Sales, New Models Win User Favor

Although iPhone revenue saw a slight decline, Cook emphasized that iPhone 15 performed significantly better than iPhone 14, reaching an all-time high in installed base during the third quarter. iPhone revenue hit record highs in countries like the UK, Spain, Poland, Mexico, Indonesia, and the Philippines, with the global total installed base also reaching a new record.

Several iPhone models secured top spots on global best-selling smartphone lists during the third quarter. iPhone was the most popular model in the US, urban China, the UK, Germany, Australia, and Japan. According to the latest report by 451 Research, the iPhone 15 series achieved an impressive 98% user satisfaction rate in the US. Users widely praised the iPhone 15 series for its exceptional battery life, remarkable camera performance, and incredible power and efficiency.

Regarding the upcoming iPhone 16, Cook expressed the companys great excitement about Apple Intelligence and the new level of value it brings to users, adding that it will be another compelling reason to upgrade to iPhone.

Apple Intelligence Gearing Up, Delivering Revolutionary User Experiences

Cook expressed his enthusiasm for the future of Apple Intelligence, emphasizing his strong belief in the potential of artificial intelligence and its ability to significantly enrich users lives. The company will continue to make significant investments in AI, dedicated to unlocking its full innovative potential.

This week, Apple officially launched Apple Intelligence for developers, with some features already unveiled on Monday. Cook stated: We are eager for developers to have the opportunity to take their app experiences to a whole new level. With the initial release of the beta, we are curious and excited to see how developers will leverage Apple Intelligence to create remarkable outcomes.

Cook predicts widespread adoption of Apple Intelligence in app development, with its diverse features adaptable to various applications. He also revealed that the release of Apple Intelligence features will be phased, with some functionalities planned for gradual rollout throughout the year. Initially, the service may only be available to users in American English, but will be expanded to more languages in the future. Apple has already engaged with regulatory authorities in Europe and China with the hope of enabling the service.

Regarding whether Apple Intelligence can boost iPhone sales, Cook believes its too early to say. However, he revealed that Apple is increasing investments in artificial intelligence and machine learning with plans to further increase such investments annually. Additionally, the integration of ChatGPT and Siri is steadily progressing, expected to be completed by the end of the year.

iPad Sales Surge, Driven by New Models and M-Series Chips

Driven by the M4 iPad Pro and M2 iPad Air launched in the third quarter, Apple iPad sales experienced a significant increase. Revenue surged by 24% year-over-year, reaching $7.2 billion, surpassing the $5.8 billion achieved in the same period last year. The iPads installed base continues to rise, setting a new record. The third quarter saw a 50% increase in new users. Customer satisfaction surveys in the US reached an impressive 97%.

Cook emphasized that the new iPad Pro, powered by the M4 chip, not only redefined the boundaries of energy efficiency and performance but also became the core driving force behind this ultra-thin and lightweight device. This chip allows video editors and musicians to benefit from cutting-edge AI technologies in professional software like Final Cut Pro and Logic Pro. Notably, iPad Pro and iPad Air equipped with Apples M-series chips will be seamlessly integrated into Apple Intelligences powerful ecosystem, providing users with unprecedented smart experiences.

Services Business Delivers Strong Performance, Paid Subscriptions Cross 1 Billion Mark

Apples services business demonstrates robust growth, reaching $24.2 billion in revenue during the third quarter, a 14% increase year-over-year, setting another record. Apple CFO Maestri attributed the ongoing success of the services business to the steady growth of the active installed device base, laying a solid foundation for future expansion of the Apple ecosystem.

As users engage more with Apple services, both transaction and paid accounts reached record highs, with paid accounts experiencing double-digit year-over-year growth. Notably, the number of paid subscriptions for Apple services surpassed the 1 billion mark, a milestone doubling the figure achieved four years ago.

Maestri also highlighted Apple's strong performance in elevating service quality and expanding content libraries. The company plans to continuously inject fresh content into platforms like Apple TV+ and Apple Arcade to enhance user experiences. Additionally, Apple's performance in advertising, cloud computing, and payment services showed remarkable strength, all reaching new business records.

China Market Shows Steady Performance, Apple Confident in Long-Term Opportunities

Despite a 6.5% year-over-year decline in revenue in Greater China during the third quarter, the actual decline was less than 3% in constant currency terms. Over half of the decline was attributed to currency fluctuations, reflecting a significant improvement compared to the first half of the fiscal year, with growth momentum accelerating.

Focusing on iPhone performance in Greater China, its installed base reached a new high, and the phone upgrade rate in mainland China also hit a peak in the third quarter, signaling strong market performance. Research data shows that iPhone holds a stable top-three position in the Chinese urban market. Compared to the same period last year, the iPhone 15 series outperformed the iPhone 14 series in terms of market performance within the same time frame after launch, demonstrating the products enduring appeal.

Furthermore, Apple pays close attention to new customer growth. In the Mac and iPad segments, the mainland China market saw a rapid increase in new customers, many of whom are first-time Apple product buyers. New products, including smartwatches, have also been warmly received. Notably, iPad sales have resumed growth in Greater China, aligning with global market trends.

Overall, we remain confident in the long-term growth opportunities in the Chinese market.

Responding to the Digital Markets Act, Apple Intelligence Temporarily Delayed in EU

Maestri stated that Apple will continue to discuss its compliance with the European Commission's Digital Markets Act (DMA). Apple has observed a high level of acceptance among developers for these changes. Overall, the performance of the services business and the app store has been "quite good so far." Maestri reiterated that the app store contributes 7% of Apples total revenue in the EU.

Cook mentioned that Apple is working to understand the regulatory requirements it needs to comply with before introducing Apple Intelligence in the EU. When iOS 18, iPadOS 18, and macOS Sequoia are released, Apple Intelligence features will not be available in the EU.

Outlook: Apple Expects Similar Revenue Growth Rate in Q4

Apple is optimistic that its Q4 revenue growth rate will remain similar to the rate achieved in Q3. As for services, Apple anticipates strong double-digit revenue growth in Q4, with a gross margin between 45.5% and 46.6%. The company projects operating expenses between $14.2 billion and $14.4 billion.

Apple CFO Maestri pointed out that the Mac product line will face a notable challenge in Q4 compared to a year ago when the release of the 15-inch MacBook Air in the fall significantly impacted the quarters performance. Rumors suggest that Apple may release a new M4 MacBook Pro before the end of the year, but Maestri hinted that this launch could be impacted or adjusted if the company forecasts a decline in Mac revenue.