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Apple Inc. (AAPL.O) FY Q4 2024 Earnings: A Consistent Performance, Backed by Hardware Gains and Robust Software Margins$Apple(AAPL)$  

On November 1, 2024, Apple reported its Q4 FY2024 earnings (ending September 2024), showing a solid, steady performance that largely met market expectations. Here's a breakdown of the key insights with a value-investing perspective.

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1. Overall Performance: Revenue & Profit

Apple posted revenue of $94.9 billion, a 6.1% year-over-year growth, slightly exceeding consensus estimates of $94.32 billion. This revenue boost primarily came from increases in iPhone, iPad, and wearables. Gross margin rose to 46.2% from last year’s 45.2%, close to the expected 46%, with Apple’s services division holding an impressive 74% margin—demonstrating the resilience and high profitability of its software segment.

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2. iPhone Segment: Growth in Both Volume and Price

The iPhone business, Apple's main growth engine, brought in $46.2 billion this quarter, up 5.5% year-over-year and above the expected $45.04 billion. The recent launch of the iPhone 16 series spurred both unit volume and average selling price (ASP) increases. According to estimates, iPhone shipments grew by 4.5%, with ASP rising by 1%, reaching around $825.

This segment’s performance underscores Apple’s ability to command premium pricing and maintain high demand, despite macroeconomic conditions.

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3. Other Hardware Beyond iPhone: Mixed Results with Promising Upside

Mac: Revenue reached $7.7 billion, a 1.7% year-over-year growth. Although Mac shipments were down, likely due to customers waiting for the upcoming M4-powered models, the ASP jumped by almost 30% to approximately $1,460. This points to Apple’s success in creating demand for premium, higher-priced models.

iPad: iPad revenue grew by 7.9%, hitting $7 billion, consistent with market expectations. The broader tablet market has shown signs of recovery, supporting Apple’s iPad sales momentum. The iPad’s comeback illustrates Apple’s capacity to capture cyclical upgrade demand, with a stable revenue base in this segment.

Wearables and Other Hardware: Revenue here saw a 3% year-over-year decline to $9 billion, slightly below the market consensus of $9.17 billion. This segment has faced demand challenges for five consecutive quarters, though the rate of decline is narrowing. With future upgrades and product refinements, Apple may still harness this division’s potential.

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4. Software Services: Strong, High-Margin Growth

Apple’s software services segment reported revenue of $25 billion, an 11.9% year-over-year rise. Although this missed the market estimate of $25.28 billion, services continued to be the most resilient and profitable arm of Apple’s business. The segment’s 74% margin, maintained for 13 straight quarters, contributed 44% of Apple’s gross profit from 26% of total revenue.

This high-margin, recurring-revenue business is Apple's “stabilizer,” consistently generating strong profitability even when hardware markets soften.

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 Overall Take: A Balanced Report

This quarter’s results reflect a solid, predictable performance from Apple. Revenue growth was mainly supported by iPhone, iPad, and software services, while operating profit, adjusted for a one-time $10.2 billion EU tax payment, stood at $24.9 billion, slightly above market estimates.

Segment-Specific Observations:

1. Core Hardware (iPhone, iPad, Mac): iPhone continued to grow in volume and ASP, while iPad’s revenue stabilized at $7 billion amid recovering tablet demand. Mac demand held steady, with customers awaiting the M4 MacBook lineup.

2. Wearables & Other: This segment continued to decline, reflecting ongoing demand softness.

3. Software Services: This segment posted robust growth, showcasing the advantages of high-margin, recurring revenues that provide stability for Apple’s overall performance.

4. Capital Expenditures: Apple’s capital expenditures rose slightly to $2.9 billion, but remain modest relative to operating profit.

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Forward-Looking Outlook

Apple projects low- to mid-single-digit revenue growth for the next quarter, slightly below consensus expectations of 7%. However, Apple’s historical trend suggests actual performance often modestly exceeds its guidance. Moreover, Apple's high valuation (around 33x P/E, with operating income of $103.9 billion for FY2024) reflects market optimism about Apple’s potential in AI-driven products and monetization.

For further upside, investors should look for unexpected breakthroughs, particularly in AI.

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