Apple’s Q3 FY2024 earnings call revealed a new June quarter revenue record of $85.8 billion, up 5% year-over-year, surpassing expectations with a double-digit EPS growth to $1.40. This performance was driven by strong demand across Apple’s product lines, including a slight decline in iPhone revenue to $39.3 billion, a 2% increase in Mac revenue to $7 billion, and a notable 24% increase in iPad revenue to $7.2 billion. The company also highlighted the launch of Apple Intelligence, integrating advanced AI across devices to enhance user experiences, and announced significant partnerships, particularly in the deployment of Apple Vision Pro for innovative spatial computing experiences. Despite a 2% decline in Wearables, Home, and Accessories revenue, Apple’s services reached an all-time high with a 14% growth, demonstrating the company’s continued expansion and innovation in its offerings.

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Key Takeaways

• In the Q3 FY2024 earnings call, Apple addressed its performance and strategic outlook in China with a nuanced perspective. The company reported a 6.5% year-over-year decrease in overall revenue from Greater China, attributing over half of this decline to currency fluctuations. However, this represented an improvement compared to the first half of the fiscal year, signaling a positive trend in the region. Tim Cook highlighted the iPhone 15’s performance, noting it outperformed the iPhone 14 for the same number of weeks post-launch, demonstrating continued consumer interest and approval of Apple’s latest offerings.

• There was generally positive sentiment, with investors showing enthusiasm about Apple Intelligence and the company’s AI strategy and its potential positive impact on both hardware and services revenue.

• The regulatory environment, particularly in the European Union (EU) and China, was addressed during the earnings call but did seem to be a high concern for investors. Apple is focused on understanding and complying with regulatory requirements, especially regarding the staggered launch of Apple Intelligence features. Apple aims to roll out these features as swiftly as possible, balancing the need for innovation with regulatory compliance.

What’s Significant

• The iPhone set June quarter sales records in several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. Customer satisfaction with the iPhone 15 family remains extremely high, with research measuring it at 98% in the US. The active installed base of iPhones grew to a new all-time high across all geographic segments. With Apple Intelligence rolling out to the iPhone 15 Pro/Max and beyond, there is an opportunity to drive upgrades, especially in the US market.

• Apple’s installed base of active devices reached an all-time high across all products and geographic segments. This is material for the long-term opportunity in subscription revenue. Revenue from subscriptions grew double digits in 3Q, with well over 1 billion paid subscriptions across services. That’s more than double what Apple had just four years ago. The size and level of engagement that Apple sees across devices make the ecosystem extremely appealing to developers, content creators—from video to gaming -and AI providers.

• The iPad installed base continued to grow, reaching an all-time high. This growth is partly due to the fact that half of the customers purchasing iPads during the quarter were new to the product. Apple reported high customer satisfaction rates for its iPad lineup, with recent measurements indicating a 97% satisfaction rate in the U.S. While currently, the iPad outsells the Mac, I believe the opportunity for the Mac in the enterprise remains bigger than it ever was for iPad especially as Apple Intelligence rolls out.

Financial Performance:

Apple reported Q3 fiscal year 2024 revenue of $85.8 billion, up 5% year-over-year.

EPS grew double digits to $1.40, achieving a record for the June quarter.

Services revenue reached an all-time record of $24.2 billion, growing 14% year-over-year.

iPhone revenue was $39.3 billion, down 1% year-over-year but grew on a constant currency basis.

Mac revenue was $7 billion, up 2% year-over-year.

iPad generated $7.2 billion in revenue, up 24% year-over-year.

 

Business Highlights:

• Services reached an all-time revenue record of $24.2 billion, growing 14% year-over-year. This segment’s growth is driven by an increasing number of paid subscriptions, which now exceed 1 billion.

• Wearables, Home, and Accessories saw a 2% year-over-year decrease in revenue but indicates potential for growth, with nearly two-thirds of Apple Watch buyers being new to the product.
• Mac and iPad revenues grew by 2% and 24% year-over-year, respectively, indicating strong demand for Apple’s computing devices. While Apple does not provide specific numbers or guidance on enterprise sales, there is no question this segment has been growing in importance for Mac and will help Apple further in decreasing its dependence on seasonal consumer buying patterns.
• As expected, Apple provided no color on Vision Pro sales trend but did share insights into how leading organizations like Boston Children’s Hospital and Lufthansa are already leveraging Apple Vision Pro to create innovative spatial computing experiences. Cook also underlined the opportunity in the consumer space as developers created 2500 native spatial apps and one and a half million compatible apps for Vision OS. The announcement last month that Apple will be bringing some new immersive content to Vision Pro, including new series, concerts, films, and more, also highlights the opportunity to grow revenue specifically around content.

Outlook:

Apple expects foreign exchange to continue impacting revenue negatively, projecting a similar growth rate for the September quarter as observed in the June quarter.

The company anticipates double-digit growth in services revenue, consistent with the performance in the first three quarters of FY2024.

While specific guidance for product categories was not provided, challenges in comparing segments, especially for Mac and iPad due to previous launches, were noted. However, the continued growth in services and the potential impact of Apple Intelligence on product demand are positive indicators.

Apple’s Q3 FY2024 earnings call paints a picture of a company that continues to grow and innovate despite macroeconomic challenges. The financial performance underscores Apple’s profitability and cash-generating capabilities, while business highlights reflect strategic geographic expansion and investment in AI and machine learning. The outlook suggests cautious optimism, with services expected to continue driving growth and product revenue potentially facing headwinds from foreign exchange impacts.

During the earnings call, investors’ interest in Apple Intelligence highlighted its potential to impact Apple’s revenue strategy significantly. More than just boosting hardware sales, Apple Intelligence is a key innovation that could enhance service personalization and user experiences. This optimism suggests Apple Intelligence could be a game-changer, deepening user engagement with smarter, more tailored interactions and reinforcing Apple’s leadership by integrating advanced AI into everyday technology use.

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