Apple (AAPL.O) released its fiscal fourth-quarter earnings report for fiscal year 2024 (ending September 2024) after U.S. market hours on November 1, 2024, Beijing time.

1. Overall Performance: Revenue & Profit, Meeting Market Expectations. Apple generated revenue of $94.9 billion in this quarter, up 6.1% year-on-year, slightly better than market consensus ($94.32 billion). The increase in revenue was mainly driven by growth in iPhone, iPad, and smart wearable devices. Apple's gross margin was 46.2%, an increase of 1 percentage point year-on-year, which is broadly in line with market expectations (46%). The gross margin of the software services business remained high at 74% this quarter.

2. iPhone: Both Volume and Price Increased. Driven by the launch of the iPhone 16 series, Apple's mobile phone business saw an increase in both shipments and average selling prices this quarter. Dolphin Insights estimates that iPhone shipments increased by 4.5% year-on-year, and the average selling price also increased by 1% year-on-year.

3. Other Hardware Beyond iPhone: Both Mac and iPad Showed Growth. The tablet market recovered, combined with the company's new products this year, and iPad revenue remained stable at $7 billion. Although Mac revenue grew this quarter, shipments declined by double digits year-on-year, mainly due to customers waiting for Mac products with the new M4 chip. Other hardware businesses, such as wearables, continued to decline by 3% this quarter, with demand still weak.

4. Software Services: Continued Growth. Software services revenue was $25 billion this quarter, slightly below market consensus ($25.28 billion). Software services revenue hit a new high this quarter, and the gross margin remained high at 74%. With a high gross margin, Apple's software business, which accounts for nearly 26% of revenue, generates 44% of the company's gross profit, serving as a stabilizer for the company's performance.

Dolphin Insights' Overall View: Apple's financial report this time is relatively standard.

The company's operating performance this quarter met market expectations. The growth in revenue was mainly driven by the increase in iPhone, iPad, and smart wearable devices. The sharp decline in net profit was mainly due to the one-time tax payment to the European Union. Excluding the impact of this $10.2 billion tax payment, the company's net profit for this quarter returned to $24.9 billion, slightly better than market expectations ($24.3 billion).

Looking at each business specifically: 1) The company's core hardware (iPhone, iPad, and Mac) all showed varying degrees of growth this quarter, with the largest segment, iPhone, experiencing slight increases in both shipments and average selling prices; 2) The company's wearable and other businesses continued to decline this quarter, with market demand remaining relatively weak; 3) The company's software services business continued to maintain double-digit growth, representing the most stable part of the company's growth; 4) The company's capital expenditures increased this quarter, with quarterly expenditures rising to $2.9 billion, but they are still relatively small compared to the company's operating profit.

Overall, Apple's core hardware segment has shown improvement. After the full lineup of the new iPhone series was equipped with 3nm chips, sales of the iPhone 16 series were better than those of the iPhone 15 series in the same period last year. With the support of new products and a recovery in demand, iPad revenue stabilized at $7 billion. As for Mac, shipments declined this quarter, mainly due to the market waiting for new products equipped with the M4 chip.

Regarding next quarter's revenue guidance, the company provided a year-on-year growth rate of low to mid-single digits, slightly lower than the market consensus of 7%. Based on Apple's historical performance, which is slightly better than the company's guidance, the final revenue may not differ significantly.

Regarding the company's profits, this quarter was impacted by a one-time tax payment to the European Union. Excluding this impact, the company's operating profit for this quarter was still $24.9 billion, and the operating net profit for fiscal year 2024 was $103.9 billion. The current stock price corresponds to a PE ratio of approximately 33 times. For companies maintaining single-digit growth, the market gives a valuation of over 30 times, which also includes the market's expectations for the company's AI terminal and related monetization capabilities. This financial report basically met market expectations, and further growth will still require the company to exceed expectations. Subsequent focus should be on the company's management exchange meeting for insights into the company's future business outlook, AI-related layouts, and monetization details.

Below is a detailed analysis

I. Overall Performance: Revenue & Profit, Meeting Market Expectations

1.1 Revenue: In the fourth quarter of fiscal year 2024 (i.e., 3Q24), Apple generated revenue of $94.9 billion, up 6.1% year-on-year, slightly better than market consensus ($94.32 billion). The increase in revenue was mainly driven by growth in iPhone, iPad, and software services. While revenue in Greater China declined slightly, revenue in other regions increased to varying degrees.

From both hardware and software perspectives:

1) Apple's hardware business grew by 4.1% this quarter. Although wearable and other businesses still declined, the company's core hardware products (iPhone, iPad, and Mac) all showed varying degrees of growth this quarter, directly driving the continued recovery of the hardware segment.

2) Apple's software business grew by 11.9% this quarter, maintaining double-digit growth. The software business has a certain degree of risk resistance. Even during periods of relatively low hardware revenue, software services have consistently maintained growth.

From a regional perspective: Apple's revenue in Greater China declined this quarter, while it increased in varying degrees in other regions. In Greater China, some products still face the impact of insufficient demand and market competition. Specifically, the Americas are Apple's largest source of revenue, with a 3.9% increase this quarter, while revenue in Greater China declined by 0.3% this quarter.

1.2 Gross Margin: In the fourth quarter of fiscal year 2024 (i.e., 3Q24), Apple's gross margin was 46.2%, an increase of 1 percentage point year-on-year, broadly in line with market expectations (46%). The increase in gross margin was mainly driven by the growth in software business gross margin.

Dolphin Insights analyzes the gross margins of hardware and software separately:

Apple's software gross margin remained high at 74% this quarter, which was the main contributor to the company's gross margin improvement this quarter. The hardware gross margin fell slightly to 36.3%, mainly due to promotional policies for some products and inventory preparation for new products.

1.3 Operating Profit: In the fourth quarter of fiscal year 2024 (i.e., 3Q24), Apple's operating profit was $29.6 billion, up 9.7% year-on-year. The increase in operating profit was driven by the increase in revenue and gross margin.

Apple's operating expense ratio was 15.1% this quarter, an increase of 0.1 percentage points year-on-year. The company's sales and research and development expenses increased this quarter, but their proportions remained stable.

II. iPhone: Both Volume and Price Increased

In the fourth quarter of fiscal year 2024 (i.e., 3Q24), iPhone revenue was $46.2 billion, up 5.5% year-on-year, better than market consensus ($45.04 billion). The growth in iPhone revenue this quarter was mainly driven by the overall recovery in shipments and average selling prices. The new iPhone 16 series went on sale on September 20, and sales in the first eight days were better than those of the iPhone 15 series in the same period last year.

Dolphin Insights analyzes the relationship between volume and price to understand the main sources of iPhone revenue growth this quarter:

1) iPhone Shipments: According to IDC data, the global smartphone market grew by 4.4% year-on-year in the third quarter of 2024. Apple's shipment growth rate was around 4.5% this quarter, slightly better than the overall market.

2) iPhone Average Selling Price: Based on iPhone revenue and shipment calculations, the average selling price of iPhones was approximately $825 this quarter, up 1% year-on-year. The third quarter is typically a period when Apple's average iPhone selling price is relatively low, as some customers wait to purchase the upcoming new models. This quarter, driven by the launch of the new iPhone 16, the average selling price increased.

III. Other Hardware Beyond iPhone: Both Mac and iPad Showed Growth

3.1 Mac Business

In the fourth quarter of fiscal year 2024 (i.e., 3Q24), Mac revenue was $7.7 billion, up 1.7% year-on-year, broadly in line with market expectations ($7.75 billion).

According to IDC's report, global PC shipments grew by 1% year-on-year this quarter, while Apple's shipments declined by double digits year-on-year, significantly underperforming the overall market. Dolphin Insights believes this is mainly due to the market waiting for Apple's new MacBook Pro equipped with the M4 chip to be launched this year.

Combining company and industry data, Dolphin Insights estimates that Apple's average selling price for Macs was $1,460 this quarter, an increase of nearly 30% year-on-year. The growth in Mac revenue this quarter was mainly driven by the increase in average selling price.

3.2 iPad Business

In the fourth quarter of fiscal year 2024 (i.e., 3Q24), iPad revenue was $7 billion, up 7.9% year-on-year, broadly in line with market consensus ($7.07 billion). The iPad business remained the fastest-growing hardware segment this quarter.

From an industry perspective, the tablet market has significantly recovered since the previous quarter. Overall industry shipments rebounded by 21.6% year-on-year in the second quarter, with quarterly shipments stabilizing above 30 million units, including a 17% increase in iPad shipments. Dolphin Insights believes that after a prolonged downturn in the tablet market since the public health incident, there is now some demand for replacement. Coupled with Apple's new iPad products this year, iPad revenue remained stable at $7 billion this quarter.

3.3 Other Hardware Such as Wearables

In the fourth quarter of fiscal year 2024 (i.e., 3Q24), revenue from other hardware such as wearables was $9 billion, down 3% year-on-year, slightly below market consensus ($9.17 billion). Wearable and other businesses have declined for five consecutive quarters, with overall demand remaining weak. However, the decline has narrowed significantly in the past two quarters.

IV. Software Services: Continued Growth

In the fourth quarter of fiscal year 2024 (i.e., 3Q24), software services revenue was $25 billion, up 11.9% year-on-year, slightly below market consensus ($25.28 billion). The software business is the most stable segment, with revenue continuing to grow. The growth in software services is mainly driven by user retention and an increase in revenue per user.

In software services, the most notable aspect is the gross profit margin of software services. In this quarter, the gross profit margin of software services remained at 74%, continuing to stay at a high level and stabilizing above 70% for 13 consecutive quarters. With a high gross profit margin, the company's software business, accounting for nearly 26% of revenue, generates 44% of the company's gross profit, acting as a stabilizer for the company's performance.

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