Apple slips in after hours after holiday outlook falls short
2min read Apple’s Q4 earnings report surpassed expectations with EPS of $1.64, above analyst estimates of $1.60, and revenue of $94.93 billion, beating the expected $94.5 billion. Despite this, Apple’s stock declined in after-hours trading by around 1.7%, as investors reacted to lower-than-anticipated guidance for the upcoming holiday quarter, with expected revenue growth in the low to mid-single digits, slightly below Wall Street’s projected 6.8%.
A key highlight was Apple’s iPhone revenue, which reached $46.22 billion, marking a 5.5% year-over-year increase, surpassing the $45.04 billion expectation. This growth stemmed from strong iPhone sales across all geographic markets, aided by the recent release of the iPhone 16. Notably, Apple stated that iPhone sales achieved a record for the September quarter, a crucial period leading up to the holiday season.
Apple’s Services segment also posted strong results with revenue of $24.97 billion, marking a 12% year-over-year growth. However, this slightly missed analyst expectations of $25.27 billion. Services remain a vital growth driver for Apple, encompassing subscriptions for Apple Music, iCloud, and Apple TV+, which help offset the seasonality of hardware sales.
Gross margin for the quarter was $43.88 billion, exceeding the $43.46 billion estimate and reflecting an 8.5% year-over-year increase. Apple’s overall product margins benefited from its operational efficiencies, but higher costs in newer segments, such as AI and data processing, may weigh on future margins. Gross margins remain a key area of focus as Apple invests in emerging technologies.
Despite solid numbers, Apple saw a 0.3% decline in Greater China revenue, bringing in $15.03 billion, below the $15.8 billion expected. The Chinese market remains challenging due to competition from local brands and regulatory hurdles, and Apple’s slight revenue decline in this region raised concerns about its competitive position.
The quarter also recorded operating expenses of $14.29 billion, which were in line with estimates. However, net income dropped approximately 35% to $14.7 billion, impacted by a substantial one-time tax charge related to a European judicial ruling, requiring Apple to pay taxes of over $14 billion to Ireland. Excluding this charge, Apple’s EPS would have been higher.
Guidance for Q1 anticipates single-digit revenue growth and continued double-digit growth in Services, yet it falls short of prior growth patterns. The cautious outlook, along with commentary on a slower-than-expected rollout of new AI tools under “Apple Intelligence,” which launched shortly after iPhone 16, added to investor caution around the stock.
The recent launch of Apple Intelligence, alongside product updates like new iMacs and MacBook Pros, aims to enhance Apple’s product ecosystem for the holiday season. However, key AI-driven features are still in development, with anticipated updates in the coming quarters, leaving some investors awaiting tangible returns on AI investments.
Apple’s stock, while down following the report, remains up significantly for the year. However, high expectations and limited guidance for a typically strong Q1 have tempered enthusiasm, with analysts closely watching how Apple navigates competition in China and further integrates AI to strengthen its ecosystem.
