Apple Q3 - Strong showing

Apple reported earnings on Thursday that surpassed Wall Street forecasts with a 5% revenue increase. Despite the strong performance, Apple shares remained flat in after-hours trading and only closed 0.7% higher on Friday.

The company made $85.78 billion in revenue for the quarter, up 5% year-on-year, beating expectations. Net income reached $21.45 billion, up from $19.88 billion the previous year. The iPhone remains Apple's top revenue generator, accounting for roughly 46% of total sales, despite a 1% decline year-over-year to $39.3 billion.

CEO Tim Cook highlighted that, on a constant currency basis, iPhone revenue actually grew year-over-year. He also mentioned that while the new Apple Intelligence (AI) service won't impact sales until later this year, the company has increased spending to prepare for its launch.

The iPad division was a standout, with sales soaring nearly 24% year-over-year to $7.16 billion, driven by a new product release. Mac sales rose by a more modest 2%, and the Wearables, Home, and Accessories category declined by 2%.

The Services segment, which includes revenue from Google, cloud storage subscriptions, and content services like Apple TV+, grew 14% to a record $24.21 billion.

Despite a second consecutive quarter of declining iPhone revenue and a 6% drop in Greater China sales, we remain hopeful that Apple's upcoming AI features will drive future growth. The company's new AI tools are set to be a key factor in encouraging iPhone upgrades when they launch later this year.

Looking ahead, Apple CFO Luca Maestri noted that the company anticipates similar revenue growth in the current quarter, with Services expected to grow at around 14%, consistent with the last three quarters. Operating expenses are projected to stabilise, with gross margins ranging from 45.5% to 46.5%.

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