ii view: Apple’s holiday quarter breaks records
With over one billion subscriptions contributing to service revenues and the rollout of its AI services ongoing, we assess prospects for this US tech giant.
31st January 2025 15:37
by Keith Bowman from interactive investor
First-quarter results to 28 December
- Revenue up 4% to $124.3 billion (£100.7 billion)
- Adjusted earnings up 10% to $2.40 per share
- Dividend of $0.25 per share (20.25p), unchanged from Q4
Chief Executive Tim Cook commented:
“Today Apple is reporting our best quarter ever. We were thrilled to bring customers our best-ever lineup of products and services during the holiday season. Through the power of Apple silicon, we’re unlocking new possibilities for our users with Apple Intelligence, which makes apps and experiences even better and more personal. And we’re excited that Apple Intelligence will be available in even more languages this April.”
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ii round-up:
Apple Inc (NASDAQ:AAPL) detailed record quarterly earnings, with ongoing growth in demand for services such as iCloud data storage also fuelling a new all-time high for three-month revenue.
Revenue for the quarter to 28 December climbed 4% to $124.3 billion, aided by a 14% expansion in service revenues to $26.3 billion. Sales of its core iPhone product retreated almost 1% to $69.1 billion, although with Apple guiding towards better-than-expected overall sales growth for the current second quarter to late March.
Shares in the Dow Jones and Nasdaq giant responded well to the results, having come into these latest numbers up 29% over the last year. That’s similar to the tech-heavy Nasdaq index itself but behind a 43% gain for Android phone software maker and owner of Google Alphabet Inc Class A (NASDAQ:GOOGL).
Apple flagged more than one billion subscriptions contributing to record service revenues of $26.3 billion, which includes direct subscriptions for services such as Apple TV+ as well as subscriptions to third-party apps acquired through its App store.
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Elsewhere, revenue from Mac PCs were up 15% from a year ago to $8.98 billion. iPad revenue grew by a similar amount to $8 billion, although sales for Wearables, Home and Accessories, including the Apple watch, fell almost 2% to $11.75 billion.
Geographically, sales improved for every region apart from China, where they fell 11% to $18.5 billion. Sales for the Americas, its biggest region and including the USA, rose 4.4% to $52.6 billion.
The Tim Cook headed company returned over $30 billion to shareholders during the quarter, including an unchanged dividend of $0.25 per share.
Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, raising its fair value price to $275 from $273 per share.
ii view:
Coming to the stock market in 1980, Apple today employs over 160,000 people. Headquartered in Cupertino, California, Apple devices and services compete against an array of rivals including Samsung, Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) owned AWS and Prime TV, as well as others such as Spotify Technology SA (NYSE:SPOT), Netflix Inc (NASDAQ:NFLX), and The Walt Disney Co (NYSE:DIS).
For investors, heightened tensions between the US and China have raised distrust, with consumers now more cautious of buying products from the opposing nation. Concerns about a lack of product innovation, particularly regarding Apple’s core iPhone, persist. Donald Trump’s trade tariffs have heightened concerns for inflation and the outlook for interest rates, while a forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.
On the upside, the tie-in of customers using its services on their Apple devices generates high customer loyalty. Product innovation now includes the rollout of AI based intelligence features and the previous introduction of a new 3D headset. Product and geographical diversity exist, including exposure to payment services, while the dividend, although not a core attraction, has been increased consecutively for the last 10 years, with the shares sat on a yield of around 0.4%.
In all, and despite continued risks, this tech titan looks to remain worthy of its place in many already diversified investor portfolios.
Positives:
- Diverse geographical markets
- Strong customer loyalty
Negatives:
- Dependency on iPhone sales
- Strained relations between the West and China
The average rating of stock market analysts:
Buy
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