Apple Earnings: Stock Wavers Despite Strong iPhone Sales

Topline

Apple reported better than expected revenue Thursday as investors eagerly await evidence of financial growth amid Apple’s push to bring generative artificial intelligence to iPhones, though a major tax ruling weighed on the company’s profits.

Key Facts

Apple brought in $94.9 billion in sales for the quarter ending last month, exceeding average analyst estimates of $94.5 billion and $1.64 diluted earnings per share, topping forecasts of $1.60 EPS, according to FactSet.

The Silicon Valley giant’s revenue rose 4% year-over-year and operating profits climbed 10%, though Apple’s net income notched an unexpected decline of 36% tied to a European Union ruling against the company over a tax dispute.

Apple reported $46.2 billion of iPhone revenue for the first quarter including early numbers from the iPhone 16 released Sept. 20, topping Wall Street estimates of $45.2 billion in smartphone sales.

But Apple reported its sixth consecutive quarter of an annual sales decline in greater China, with the $15 billion in revenue from the region falling well short of estimates of $15.9 billion.

Apple stock dipped about 1.5% immediately after the earnings announcement, having dropped 1.8% in normal trading hours during a broader tech selloff following earnings reports from Microsoft and Facebook parent Meta.

Big Number

$10.2 billion. That’s how large of an income tax hit Apple took during the quarter from the September ruling wiping away the company’s special tax status in Ireland.

Surprising Fact

The tax charge sent Apple’s net income for its 2024 fiscal year to $93.7 billion, technically the company’s lowest net income since its fiscal year ending September 2020.

Key Background

Apple is the largest technology company in the world by profits, with its more than $93 billion in net income trouncing the $88 billion brought in by the next highest earner, Microsoft, during its most recent fiscal year, followed by Google parent Alphabet at $74 billion, Meta’s $39 billion and Amazon and Nvidia’s $30 billion. Unsurprisingly, Apple is also the world’s largest company by market capitalization at about $3.5 trillion, though the gap is smaller than headline financials may suggest as the iPhone maker has actually underperformed the S&P 500 over the last two years amid slow earnings growth, with adjusted profits up about 25% last quarter compared to 2022’s comparable period, worse than fellow stalwart Microsoft’s 40% growth. However, the Monday release of the Apple Intelligence generative AI operating system offered a glimpse into the generative AI technology coming to Apple devices, which some analysts predict could inspire a reacceleration in iPhone sales.

What To Watch For

How the rollout of Apple Intelligence will impact iPhone sales. Average analyst forecasts call for $72.4 billion in iPhone revenue during the quarter ending in December, which would be a record, topping the $71.6 billion in 2021’s final calendar quarter.

Further Reading