Apple, one of the world’s most valuable companies, continues to impress with its strong performance. Known for its high levels of customer satisfaction and product stickiness, it has cultivated a loyal user base and a record-high installed base of active devices. The company’s services segment continues to be a major growth driver, with revenue growing at a faster pace.
| Financial indicator | Q4 2023 (US$ million) | Q4 2024 (US$ million) | Percentage change |
| Revenue | 89,498 | 94,930 | +6.1% |
| -Products | 67,184 | 69,958 | +4.1% |
| -Services | 22,314 | 24,972 | +11.9% |
| Net income | 22,956 | 14,736 | -35.8% |
| Diluted earnings per share | 1.46 | 0.97 | -33.6% |
Revenue increased 6.1% year-on-year to US$94.9 billion in Q4 2024, driven by growth in most markets except China. Revenue from Europe including some emerging markets like Turkey and the Middle East grew 11.0% year-on-year to US$24.9 billion during the quarter. Apple opened two new stores during the quarter and will open another four in India.
Products revenue increased 4.1% year-on-year to US$70.0 billion, led by revenue growth in iPhone. Apple’s installed base of iPhone, Mac, iPad, and Apple Watch devices reached a new all-time high. This growth can be attributed to high customer satisfaction, brand loyalty, and the successful acquisition of new customers across all geographic segments.
Apple’s Services revenue worldwide increased 11.9% year-on-year to US$25.0 billion in Q4 2024 as its installed base of active devices grew. In Q4 2024, both paid accounts and subscriptions experienced double-digit year-on-year growth. Over the past four years, the number of paid subscriptions across Apple’s platform has more than doubled, surpassing 1 billion. Recurring revenue streams, such as subscriptions, are expanding at a significantly faster pace than one-time purchases.
Total gross margin increased from 45.2% in Q4 2023 to 46.2% in Q4 2024, towards the high end of its forecast. Products gross margin increased quarter-on-quarter by 100 basis points to 36.3% in Q4 2024 due to a better product mix. However, it declined year-over-year from 36.6% in Q4 2023. Services gross margin remained at 74% quarter-on-quarter, but improved from 70.9% in Q4 2023.
Net income dropped 35.8% year-on-year to US$14.7 billion in Q4 2024 due to a one-off income tax charge relating to the reversal of the European General Court’s State Aid decision amounting to US$10.2 billion. Excluding the extraordinary item, the company’s net income would have grown 12% year-on-year to US$25 billion instead.
As of the fourth quarter of 2024, Apple maintained a robust net cash position of US$50 billion. The company returned over US$29 billion to shareholders, comprising a US$3.8 billion dividend distribution and a US$25 billion share repurchase program, which involved buying back 112 million shares.
Apple’s management anticipates low- to mid-single-digit year-over-year growth in Q1 2025, contingent upon a stable macroeconomic environment. This outlook is bolstered by the recent launches of several products, including the iPhone 16, iPhone 16 Pro, Apple Watch Series 10, iPad mini (7th generation), and AirPods 4. Additionally, the company expects continued double-digit growth in Services revenue, consistent with its Q4 2024 performance.
The projected gross margin for Q1 2025 is between 46% and 47%. This forecast considers the anticipated rise in NAND and DRAM prices, which may exert upward pressure on costs. However, declining commodity prices are expected to have a favourable impact, helping to offset some of these cost increases. Overall, Apple’s diverse product lineup and robust Services segment position the company for growth, even amid evolving market conditions.
Products
In Q4 2024:
- Revenue from iPhone grew 5.5% year-on-year to US$46.2 billion in all markets.
- Mac revenue increased 1.7% year-on-year to US$7.7 billion.
- iPad revenue increased 7.9% year-on-year to US$7.0 billion.
- Revenue from the Wearables, home, and accessories segment decreased 3.0% year-on-year to US$9.0 billion.
According to Kantar’s Q3 2024 report, the iPhone 15 series remained the most popular smartphone lineup globally, with the iPhone 15 Pro Max emerging as the top-selling model.
In the U.S., Apple maintained its position as the leading smartphone brand, while in mainland China, Huawei reclaimed the top spot, driven by its latest release, the Pura 70.
In Q4 2024, more than half of the customers purchasing Mac, iPad, and Apple Watch were new to these products, indicating a significant expansion of Apple’s user base. Additionally, Apple introduced the M4, M4 Pro, and M4 Max chips to its Mac lineup, delivering enhanced performance and efficiency across its devices.
Apple Vision Pro, Apple’s mixed-reality headset, is now available in Korea and the UAE. The immersive device now boasts over 2,500 native spatial apps and 1.5 million apps that are available for visionOS 2. For instance, UC San Diego Health is pioneering the use of spatial computing apps on Apple Vision Pro, becoming the first hospital globally to test these applications in clinical trials for patient surgery in the operating room.
Services
Apple Pay has expanded its reach to tens of millions of retailers globally. Users can now access loans from various financial institutions directly at checkout. Additional features include Tap to Cash for quick money transfers and instalment payments.
Apple TV+, Apple’s streaming service, continues to be recognised with awards, and now offers MLS Season Pass, allowing viewers to watch Major League Soccer matches.
Apple’s private cloud compute ensures user privacy by processing data locally whenever possible and securely encrypting it before sending it to the cloud for more complex tasks, preventing unauthorised access.
Key analyst questions
Analysts were concerned about the company’s growth in China. During China’s Singles’ Day, iPhone sales declined by double-digits year-on-year amid fierce competition from Chinese rivals like Huawei. CFO Luca Maestri refrained from giving any specific guidance in Q1 2025 while CEO Tim Cook added that Apple’s muted year-on-year performance in China (down 0.3%) benefited from positive exchange rates. However, he still sees some positive signs despite persistent headwinds for some time. To me, the management’s tone does not come across as particularly confident overall. Analysts’ estimates of iPhone sales seemed to be mixed.
CEO Tim Cook sees Apple Intelligence as a compelling upgrade for consumers. Announced in June 2024, Apple Intelligence is a new suite of AI-powered features designed to enhance user experience across various Apple devices. It has been integrated into selected Mac, iPad, and iPhone models since October 2024. It includes enhanced writing tools, improved Siri, visual intelligence experience, and prioritisation tools and is available in U.S. English. Apple Intelligence will be enhanced in the coming months including support for more localised English across regions and more languages.
Apple is also providing developers with the tools to create new apps and services that utilise Apple Intelligence. By empowering developers, the ecosystem will become more vibrant and innovative that could contribute to more services revenue in the future. Feedback on Apple Intelligence has been positive thus far.
Cook sees opportunities despite Apple not being the market leader across Apple Music, Apple News+, and Apple Arcade, and Fitness as pointed out by an analyst. The company will strive to add new features across its services including new games and shows. Also, Apple has chosen to prioritise a premium, exclusive experience for its users as these services are primarily designed for Apple devices and are not available on other platforms like Android or Windows.
Cook clarified to an analyst that iPhone demand did not outpace supply during all four previous first quarters, particularly during the COVID-19 pandemic. Apple faced some initial challenges in producing enough iPhone 16 Pro models to meet demand, but they expect to overcome these challenges and improve availability soon. Cook aims to ensure timely product availability for consumers.
As pointed out by an analyst, Apple usually spends about 8% of its sales on research and development. Apple has been investing heavily in research and development in the past few years according to Maestri. The spending has been growing lately due to allocation of additional as well as internal resources into AI.
Maestri mentioned that Apple adopts a hybrid model as it runs its business through its owns data centres and on cloud. The company focuses on integrating AI into its existing products and services, rather than building massive AI infrastructure. This approach is likely to lead to lower capital expenditure (of around US$10 billion annually) compared to other tech giants.
Maestri did not provide the service revenue breakdown between subscription and transaction when asked by an analyst.
The fifth perspective
While Apple continues to demonstrate growth, the company’s cautious tone suggests uncertainty about the immediate impact of Apple Intelligence. The integration of ChatGPT into Apple’s operating systems is promising, but the long-term effects on product sales remain unclear. A more significant software update is expected by the end of 2024, which may provide further insights into the potential of Apple Intelligence to drive future growth.
