Q4 2024 Apple Inc Earnings Call
Good afternoon and welcome to the Apple Q4 fiscal year 2024 earnings conference call. My name is Suhasini Chandramouli, director of Investor Relations. Today's call is being recorded.
Speaking first today, our Apple CEO, Tim Cook, and CFO, Luca Maestri, and they'll be joined by Kevin Correct by President of Financial Planning and Analysis. After that, we'll open the call to questions from Analyst.
Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding revenue, gross margin, operating expenses, other income and expense.
Taxes, Capital Allocation, and Future Business Outlook, including the potential impact of macroeconomic conditions on the company's business and results of operations. These statements involve risks and uncertainties that may cause actual results or trends to differ materialies from our forecast.
For more information, please refer to the risk factors discussed in Apple's most recently filed annual report on Form 10K and the Form 8K filed with the SEC today, along with the Associated Press release.
Apple assumes no obligation to update any forward-looking statements, which speak only as of the date they are made.
Additionally, today's discussion will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures in our fourth quarter and full year 2024 earnings release, which is available on our Investor Relations website.
I'd now like to turn the call over to Tim for introductory remarks.
Tim: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $94.9 billion, a September quarter record, and up 6% from a year ago.
Tim: iPhone grew in every geographic segment, marking a new September quarter revenue record for the category.
and services set an all-time revenue record of 12% year-over-year.
We also set September quarter segment revenue records in the Americas.
Europe, and the rest of Asia Pacific, as well as in a large number of countries, including the United States,
Brazil, Mexico, France, the UK, Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record.
This has been an extraordinary year of innovation at Apple.
We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today.
And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant.
Apple Intelligence marks the beginning of a new chapter for Apple innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with private cloud compute.
with system-wide writing tools that help you refine your writing, a more natural and conversational Siri, a more intelligent Photos app, including the ability to create movies simply by typing a description, and new ways to prioritize and stay in the moment with notification summaries and priority messages.
And we look forward to additional intelligence features in December, with even more powerful writing tools, a new visual intelligence experience that builds on Apple Intelligence, and chat GPT integration.
as well as localized English in several countries including the UK, Australia, and Canada.
Tim: These features have already been provided to developers, and we're getting great feedback.
More features will be rolling out in the coming months, as well as support for more languages. And this is just the beginning.
Now I'll turn to our results for the quarter, beginning with iPhone.
Tim: iPhone revenue set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment.
With the introduction of Apple Intelligence, we're beginning a new era for iPhone.
iPhone 16 powered by A18 is equipped with an incredible new 48-megapixel Fusion camera, fantastic photo experiences, and the addition of the action button and camera control.
And iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays, an industry-leading pro camera system with camera control, and studio-quality mics, all with a huge leap in battery life.
Tim: Turning to Mac, revenue was $7.7 billion, up 2% from a year ago. Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro, and M4 Max.
Tim: From blazing fast performance to Apple's most advanced neural engine yet, our latest chips can easily tackle incredibly complex workflows.
And they ensure our newest Macs will be the best personal computers for AI the instant they hit stores.
With the newest additions to our Mac lineup, customers can choose the Mac that's just right for them.
Tim: Whether that's iMac, the world's best and most beautiful all-in-one, MacBook Air, the world's most popular laptop now with double the starting memory, MacBook Pro, the best Pro notebook anywhere, or the incredible, mighty new Mac Mini, our first ever carbon-neutral Mac.
iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools, and businesses of all sizes.
Recently, we were thrilled to introduce the newest iPad Mini featuring an ultra-compact design built for Apple Intelligence with support for Apple Pencil Pro.
It's been a big year for iPad. iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro.
Tim: In wearables, home, and accessories, revenue was $9 billion, down 3% from a year ago. During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent, and sophisticated.
It's the thinnest Apple Watch yet, making it more comfortable than ever, while offering the biggest, most advanced display.
Tim: WatchOS 11 brings some huge new health and fitness insights to users, including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition.
We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watching people's lives.
With AirPods 4, we've broken new ground in comfort and design with our best ever open ear headphones, available for the first time with active noise cancellation.
Tim: And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test, and hearing aid features.
These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives.
Tim: And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short film Submerged, which gives people a view into the unique storytelling power made possible by spatial computing.
Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for Vision OS 2, as well as applications companies are building to reimagine how they work.
Tim: Vision Pro continues to inspire awe in its users, and we're just scratching the surface of what's possible.
And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE.
As I mentioned earlier, services achieved an all-time revenue record of $25 billion, up 12% from a year ago, and with all-time revenue records across most of our categories.
With Apple TV+, we love celebrating the craft of great storytellers who know how to put on a show.
Audiences love to discover new movies like Wolves, explore acclaimed new series like Disclaimer, and dive back into returning favorites like Slow Horses and Shrinking.
Tim: Apple TV Plus productions have become fixtures at award shows, earning more than 2,300 nominations and more than 500 wins today.
Apple also offers a live sports experience in a league of its own with MLS season pass and subscribers have been cheering on their favorite teams in the MLS Cup playoffs.
This month, we also mark 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with your Apple device.
Tim: And we're excited to make the Apple Pay experience even better with the option to redeem rewards and access loans from credit cards, debit cards, and other lenders right at checkout.
Whenever we celebrate big moments, Apple stores are the best places to share them with customers.
I had an incredible time during launch day in September alongside our team at Apple 5th Avenue where energy and enthusiasm filled the air.
Tim: And in stores all over the world, customers are eager to get a closer look at our latest innovations.
We also opened two new stores during the quarter, and we can't wait to bring four new stores to customers in India.
Tim: We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them.
In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun.
As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon neutral across our entire footprint by the end of the decade.
As I mentioned earlier, we were thrilled to introduce our first ever carbon-neutral Mac with the latest Mac Mini.
Tim: And in another milestone, customers can choose a carbon-neutral option of any Apple Watch.
These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal.
Tim: At Apple, across everything we do, we manage for the long term because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough.
As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products.
Tim: This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come.
Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call.
So, I just wanted to take a moment to recognize his extraordinary service as Apple CFO and to thank him for his partnership. I am deeply grateful.
In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately.
Tim: He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from.
I have incredible confidence in our incoming CFO, Kevin Parekh, and we look forward to more of you meeting and working with him going forward.
With that, I'll turn it over to Luca.
Luca: Good afternoon, everyone, and thank you, Tim, for the very kind words.
Serving as Apple's CFO has been a real privilege and an amazing journey and I greatly appreciated the support from our investors and the analyst community over the years.
Let me now turn to the results for the fourth quarter of our fiscal year.
Tim: We are very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year.
We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe, and rest of Asia-Pacific.
Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad, and Mac.
Our installed base of active devices reached an all-time high across all products and geographic segments.
thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products.
Services revenue reached an all-time record of $25 billion, up 12% year over year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets, with double-digit growth and record results across most services categories.
Company gross margin was 46.2% near the high end of our guidance range. Products gross margin was 36.3% up 100 basis points sequentially, primarily driven by favorable mix.
Tim: Services gross margin was 74% unchanged from the prior quarter.
Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year over year.
During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's state aid decision.
Tim: When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were $1.64, up 12% year-over-year and a September quarter record.
Tim: Operating cash flow was very strong at $26.8 billion, a new September quarter record.
Let me now get into more detail for each of our revenue categories.
iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the U.S., the Middle East, Korea, and South Asia.
The iPhone Active installed base grew to a new all-time high in total and in every geographic segment.
During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar,
iPhone was the top-selling model in the U.S., urban China, the UK, Australia, and Japan.
Tim: We continue to see high levels of customer satisfaction for the iPhone 15 family with 451 research recently measuring it at 98% in the US.
Tim: Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air.
Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup.
The Mac install base reached an all-time high, with about half of customers in the quarter being new to Mac.
And in the latest reports from 451 Research, customer satisfaction was 95% in the U.S.
Tim: iPad generated 7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets with double-digit growth in Mexico, Brazil, the Middle East, India, and South Asia.
The iPad install base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US.
Tim: Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch install base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product.
And the latest reports from 451 Research indicate a customer satisfaction of 96% for watching the U.S. Our services revenue reached an all-time record $25 billion, growing 12% year-over-year.
Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem.
Both transacting accounts and paid accounts reach a new all-time high, with paid accounts growing double digits year-over-year.
Paid subscriptions also grew double digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago.
Tim: And as always, we remain focused on improving the breadth and quality of our services, from new games on Apple Arcade, to new features like Tap to Cash and Pay with Installments using Apple Pay, to many successful new and returning shows on Apple TV+.
This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked number one in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row.
Tim: Turning to enterprise, we continue to see strong demand across our products and services.
NVIDIA launched its Mac as a Choice program, supported by AppleCare for Enterprise and Apple Professional Services, with over 10,000 Macs deployed worldwide.
We also see continued momentum with Apple Vision Pro in the enterprise space.
UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room.
Tim: Let me now turn to our cash position and capital return program.
We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion.
As a result, net cash was $50 billion at the end of the quarter.
During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares.
As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to at the beginning of the call.
The color we're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter.
We expect our December quarter total company revenue to grow low to mid-single digits year-over-year.
We expect services revenue to grow double digits at a rate similar to what we reported in the fiscal year 2024.
Tim: We expect gross margin to be between 46% and 47%.
Tim: We expect OpEx to be between $15.3 and $15.5 billion.
We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%.
Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock, payable on November 14, 2024, to shareholders of record as of November 11, 2024.
Tim: With that, let us open the call to questions.
Thank you, Luca. We ask that you limit yourself to two questions. Operator, may we have the first question, please?
Speaker Change: Certainly, we will go ahead and take our first question from Michael Ng with Goldman Sachs. Please go ahead.
The developer beta so far and whether you would attribute Apple intelligence to any of the strong iPhone performance that we've seen to date. Thanks.
Thanks, Michael. As I noted in my comments, just this week on Monday, we made the first set of Apple Intelligence features available in U.S. English for iPhone, iPad, and Mac.
This includes things like system-wide writing tools.
that help you refine your writing, a more natural conversational Siri, more intelligent photos app.
Speaker Change: including the ability to create movies simply by typing a description, which is really cool, and new ways to prioritize and stay in the moment with notification summaries and priority messages.
There's also email summaries and email priority.
We're getting a lot of positive feedback from developers and customers.
Speaker Change: And, in fact, if you just look at the first three days, which is all we have, obviously, is from Monday.
The 18-1 adoption is twice as fast as the 17-1 adoption was in the year-ago quarter. And so there's definitely interest out there for Apple Intelligence.
Carrying on in the quarter.
Speaker Change: We are looking forward to bringing even more features in December and this will include even more powerful writing tools and visual intelligence experience that builds on Apple Intelligence.
and CHEP GPT integration, in addition to other features, as well as we'll bring localized English to several countries that include the UK, Australia, and Canada.
Speaker Change: Quite a software quarter between the release on Monday and the release in December, and then as we turn the corner to 25, we'll have more languages rolling out starting in April as well, and more features as well.
And so it's a...
Speaker Change: It's a very, very strong drum beat, and we couldn't be more excited about it.
Great, thank you very much. And my second one just for Luca first.
A question that I think will overlap with your new role as well, could you just talk a little bit about the CapEx outlook and whether investments in things like private cloud compute could change the historical CapEx range of roughly $10 billion a year? Thank you very much.
Thank you, Michael.
Speaker Change: On the CapEx front, I've mentioned before a number of times
We have a bit of a hybrid model in the way we run our data centers. In some cases, we use our own data centers. In some cases, we use...
third-party providers.
And so, you know, our CapEx numbers may not be fully comparable with others. But obviously, we are rolling out these features, Apple Intelligence features, already now. And so we are making all the capacity that is needed available for these features.
You will see in our 10k the amount of CapEx that we've incurred during the course of fiscal 24 and we will in fiscal 25 we will continue to make all the investments
that are necessary, and of course, investments in AI-related CapEx will be made.
Speaker Change: Great. Thank you, Tim. Thank you, Luca.
Our next question is from Eric Woodring with Morgan Stanley. Please go ahead.
Great, thanks so much for taking my questions. I have two as well. But Tim, maybe if we start with you, you know, I think each of the last four years, you've exited the December quarter with iPhone demand outpacing supply. As we look to this quarter in the iPhone 16 cycle, you know, lead times are relatively short, there are no known supply shortages. And I'm just curious whether you've been able to maybe get a better read on early cycle iPhone demand this year relative to past years. And if so, what you've learned about, you know, upgrade rates, switching rates, trade ups versus trading down and being more price sensitive, and overall, any impact that Apple intelligence may have on iPhone 16 sales. And then I have a follow up. Thank you.
Tim: There's a lot there. On Apple Intelligence, we believe it's a compelling upgrade reason.
and we'll but we just launched it three days ago and so the what we've got now from a data point point of view is the
Demand greater than supply. That's not my recollection that that happened for all four of the years. We clearly had cases during COVID where there were disruptions and...
Speaker Change: And that's...
Tim: The sum spilled over, but...
Tim: And so, if you look at how we've done this year...
Speaker Change: We
Speaker Change: Did that very quickly on the 16, on the 16 Pro family, the Pro and the Pro Max.
Speaker Change: We've been constrained in October.
but we believe that soon we'll be out of constraint and so that that's a good sign from our point of view. Keep in mind that
That's a function of supply and demand, not one side or the other, and we've been preparing for the quarter for a while. So that's what I would say there.
Okay, that's really helpful. Thank you, Tim. And then Luke, if I just turn to you, obviously, it's been a pleasure working with you. And we wish you all the best in the next role. You know, there's plenty debate in the market right now about input costs and commodity prices and the impact that'll have on gross margins.
Historically, you do guide gross margins up 50 basis points sequentially, which you just told us about for the December quarter. So can you maybe just help us understand your view of component prices, and broadly, whether you still see those as tailwinds to gross margins, and how sustainable that tailwind might be, or whether that should become a headwind as we look forward? Thanks so much.
Speaker Change: Yes, Eric, as you know, our gross margins are a factor of many, many variables. Commodities, of course, are important. They're not the only factor.
But specifically on commodities, I can tell you that both for the September quarter and what we expect for the December quarter.
Most commodities are going to move down in price while NAND and DRAM increased during the course of the September quarter and we expect them to increase
during the December quarter. We are very pleased with the level of gross margins that we've reported during the course of the year, the entire fiscal year of 24. They're really
for our company, record levels of gross margin, and obviously guiding to 46 to 47% for the December quarter with all the new technologies that we've included in the products.
with all the new features that Tim has talked about, a lot of new products across the board, I think it's a very good sign.
Speaker Change: Great. Thanks so much, Luca.
Speaker Change: Thank you, Eric. Thank you very much. Can we have the next question, please?
Speaker Change: Our next question is from Ben Bricey from Mellius. Please go ahead.
Ben Bricey: Hey, thanks a lot, and I'll echo those comments about Luca, you know, we'll miss you and good luck. And my question is with regard to iPhone.
Again, and with regard to the fourth quarter is my first question, or sorry, the fourth calendar quarter, your first quarter.
Speaker Change: When you look at mid to low single-digit revenue growth, do you expect the iPhone to grow faster?
And what are you thinking about in the answer to that question with regard to China, which, you know, is keeps improving each quarter?
Speaker Change: Thanks very much and then I have just a follow-up. Thanks. Yeah, you know Ben we are not providing that level of color today Yes, we've said that we expect total company revenue to grow low to mid single digits
Speaker Change: Keep in mind Apple Intelligence, as Tim said, is rolling out over time, both features.
Speaker Change: and Languages, and...
Speaker Change: We just had a number of exciting launches just this week, you know, from the Apple Intelligence feature.
Speaker Change: to the new max. So we leave it at that, you know, we've given you the total for the company and some pretty good direction on services which we expect to continue to grow at a similar rate than what we've seen in fiscal 24.
Well, great. Thanks, Luca. Hey, Tim, I wanted to ask you, I mean, and, you know, you guys are well aware of a lot of the noise out there.
People chattering about builds, builds, lead times.
And it certainly just sounds like, you know, you guys are typically conservative. That guide for revenue is certainly, you know, sounds like the sky is certainly not falling and you have a pretty good product cycle. So what do you think people are missing and what are you excited about? Thanks so much, Tim.
Ben, I could not be more excited about Apple Intelligence and the rollout that we've got in front of us.
I'm super excited about the health features that we're rolling out. The number of emails I'm already getting from customers...
Speaker Change: that have taken the hearing test and are using their AirPods Pro 2 as a hearing aid are just are staggering and heartwarming to read. I'm also thrilled about sleep apnea.
and the notification there that we'll have through the watch.
This week is a very exciting week for us because we just rolled out three days, three launches of different Macs and desktops and and laptops
Speaker Change: And so we have a lot of things on the docket.
Speaker Change: It's definitely the strongest lineup we've ever had going into the holiday season. In terms of the noise, I tune it out.
Speaker Change: Because if not, it would just be deafening. And so that's what I do. I can't speak for everybody else, but that's what I do.
Thanks a lot, Tim. Appreciate it. Thanks, Ben. Thank you, Ben. Can we have the next question, please?
Speaker Change: Our next question is from Amit Daryanani with Evercore. Please go ahead.
Good afternoon. Thanks for taking my questions. I have two as well.
Luca, best of luck in the future. It's been a pleasure working with you.
Amit Daryanani: I guess the first one I have is, away from iPhones, on the services side, you're at a $100 billion run rate with services today, which is a phenomenal achievement by itself. As you look at the services portfolio today, can you just talk about how much of this business do you think is reoccurring versus transactional? And are the growth rates different between the subscription portfolio over here versus transactional portfolio?
Yes, I mean, I'll take this one. Yes, we are first of all, very, very happy with it's an important milestone. Of course, we've got to a run rate of 100 billion.
You look back just a few years ago and the growth has been phenomenal.
Amit Daryanani: We're very pleased, we've got a very diversified portfolio of services, and over the years, the amount that is recurring in nature has grown.
Speaker Change: and it's growing faster than the transactional piece.
Speaker Change: We have...
well over a billion paid subscriptions on our platform right now between our own services and third-party services. That continues to grow strong double digits.
Speaker Change: So, we feel very, very good and essentially to your question, yes, the recurring portion is growing faster than the transactional one.
Speaker Change: If I can just follow up, you know, if I look at the growth rates across the different geographies, there's always concern around China when it comes to iPhone demand, I feel, but the performance in September looks fairly good. So why don't we just touch on, you know, what are you seeing from a demand perspective in China, if the recent stimulus plans in China could essentially be a catalyst for iPhone? And then EMEA really stood out with double-digit growth, maybe you can just flush that out as well for us.
Speaker Change: A key component of that improvement relative to the year-over-year performance that we had been achieving is that there was a sequential improvement in foreign exchange.
And so that helped us out. As you know, it's been a headwind that we've been reporting for a period of time.
Speaker Change: And, but the other parts that are, what else is going on there is that...
Speaker Change: Our installed base of the active devices reached an all-time high. We had
The top two selling smartphones in urban China, according to Kantar.
Speaker Change: The level of new customers that we have buying the products like Mac and iPad are well over 50%. Watch is over three quarters.
that are new to the product and and so there's
of the team there, but I'm not an economist and don't want to ad-lib on the effect of it.
Speaker Change: On the on the Europe side, I mean, a number of things, as you see from our results during the quarter, Europe grew double digits 11%. And really, it was really good growth across the board, the different segments, they all did well. Keep in mind
Our definition of Europe in our segment reporting includes a number of emerging markets like Turkey where we've grown very strongly, the Middle East,
in UAE and we also include India where we set an all-time revenue record.
Speaker Change: during the September quarter.
Great, thank you very much.
Speaker Change: Thanks, Amit. Can we have the next question, please?
Our next question is from David Vogt with UBS. Please go ahead.
David Vogt: Great, thanks everyone for taking my question and congratulations, Luca. You know, I know Luca and I know Tim, you don't want to give a lot of granularity, but if I just try to pull together your comments about what the demand environment looks like.
David Vogt: Are we to assume based on sort of the commentary...
I don't want to say caution, but maybe balance for you going into the December quarter, and then I have a follow-up.
As I said, David, we're not providing that level of color. We're giving you some data on services.
We're very excited about them, but it's early, and the Apple intelligence rollout is going to happen over time, not across the world as normally we do with software releases.
Speaker Change: Across different regions, should we see something different, let's say, you know, in the December quarter, the March quarter, the June quarter, etc., relative to history, given the timing of the rollout and where customers are probably waiting for the devices to be enabled to have the operating system, we'd just love to kind of get your perspective on how we think about that.
you know, the demand cadence, how it might be different than maybe historically. Thank you.
Yeah, David, it's clearly, as you point out, a different cadence, if you will, than we would normally do. As we talked about at WWDC, we wanted to give
Speaker Change: a comprehensive vision of Apple intelligence, and we said then that it would roll out over time, and we're right on what we said at WWDC, and so we're executing well.
In terms of the demand curve, I would just say that what we believe here is that it's a compelling reason for upgrading.
And that's both my personal experience and feedback that I'm getting, and so we'll see. But we're not projecting beyond the current quarter, obviously. We just don't do that.
Speaker Change: Great. Thanks, Tim, and best of luck, Luca.
Thank you very much.
Thank you, David. We'll take the next question, please.
Our next question is from Wamsi Moen with Bank of America. Please go ahead.
Wamsi Moen: Yes, thank you so much. Luca, we will miss you on these calls.
Tim, maybe for you, as you think about this staggered rollout of Apple Intelligence, can you help us think through potentially how much of the global install base of phones will have access to Apple Intelligence in their native language, in their region?
within the next year or maybe in the next two years and what are some of the gating factors in the rollout and I will follow up.
Speaker Change: If you look at our schedule, we started with U.S. English.
Speaker Change: That started on Monday. There's another release coming that adds additional features that I had referenced in December in not only U.S. English, but also localized for U.K., Australia, Canada.
Speaker Change: Ireland, and New Zealand.
and then we will add more languages in April.
We haven't set the specifics yet in terms of the languages, but we'll add more in April and then more as we step through the year. And so we're moving just as fast as possible while ensuring quality.
Speaker Change: That's what we're doing.
Speaker Change: Okay. Thanks, Tim. And then as a follow-up,
Speaker Change: Yeah. Ha.
at a high level prepared to potentially deal with any tariffs that might come post the selection cycle? And if not exactly how, perhaps you can just help investors think about some of the things Apple has done already to try to insulate from some of these impacts, potential impacts. You know, I wouldn't want to speculate about those sorts of things.
And so I'm going to punt on that one.
Speaker Change: Thank you for watching. Bye. Bye.
Okay. Thank you, Tim. Yeah. Thank you.
Speaker Change: Thank you Wamsi. May we have the next question please?
Speaker Change: Our next question is from Krish Sankar from TD Cohen. Please go ahead.
Krish Sankar: Hi, thanks for taking my question, and again, thanks Luca for all your help with analysts and investors. My first question is on R&D. Given how much your tech peers are spending on AI, does this new era of Apple intelligence actually require Apple to invest more in R&D beyond your current 7% to 8% of sales to capture this opportunity? And then add a follow-up.
Speaker Change: has been significant during the last several years. And obviously, as we move through the course of fiscal 24, we've also reallocated some of the existing resources.
Speaker Change: to this new technology, to AI. And so the level of intensity that we're putting into AI has increased a lot and you maybe don't see the full extent of it because we've also had some internal reallocation of the.
Speaker Change: the base of engineering resources that we have within the company.
Speaker Change: or benefit the services growth business, or is that too bifurcated to even make a call on this early mission?
Speaker Change: I think, just to keep in mind, Apple Intelligence is also available on the Mac.
Speaker Change: for the M-series products and on certain models of iPad and in addition to the phone. And so it's on all three.
Speaker Change: What was your follow-on question?
Speaker Change: Tim, it is on. Can the Apple intelligence actually help, you know, and, you know, how the services growth rate? Oh, keep in mind that we have released a lot of APIs.
and developers will be taking advantage of those APIs that release.
Speaker Change: has occurred as well, and of course more are coming.
Speaker Change: taking advantage of Apple intelligence in a big way and what that does to.
Speaker Change: Services, I'll not forecast, but I would say that from an ecosystem point of view, I think it will be great for the user and the user experience.
Speaker Change: Got it. Thanks, Tim. Yeah.
Speaker Change: All right, thank you Krish. Can we have the next question please?
Speaker Change: Our next question comes from Samik Chatterjee with JPMorgan. Please go ahead.
Samik Chatterjee: Great. Thank you. Thanks for taking my questions. And Luca, congrats on the new role.
Speaker Change: Pleasure working with you these years
Samik Chatterjee: I guess if I can for my first one start with Mix on the iPhone side and what I'm really curious about if you have any thoughts given that Apple Intelligence is now going to be a consistent feature set across all the four sort of iPhones on the iPhone 16 series that you launched and
Going back to iPhone 15 Pro and Pro Max. Are you seeing any change in behavior from a consumer perspective in terms of Which sort of on the mixed front within the iPhone series where custom consumer adoption is given that there's more Consistency of the features when it comes to Apple intelligence across the board
Speaker Change: And I have a follow-up.
Speaker Change: It's tough to answer your question because we've been constrained in October on the Pro and the Pro Max.
Speaker Change: And so it's really too early in the curve to call the precise mix on the consumer versus the pro.
Speaker Change: So we'll see.
Speaker Change: Yep.
Speaker Change: And for my follow-up, Tim, during the quarter, I think over the last 90 days, we had the quotes come out in relation to the DOJ creative to the Google sort of revenue sharing agreement that you have with them. How do you sort of look at it going forward in terms of emphasizing the role that Apple has in that ecosystem with Safari and sort of the potential outcomes that you're looking at?
You know I don't I don't want to speculate on the on that from a legal point of view it's an ongoing case and and I will
Save that for another day.
Speaker Change: Thank you. I'll leave it there. Thank you.
Speaker Change: Our next question comes from Richard Kramer with Arate Research. Please go ahead.
Speaker Change: The way that I view it is that we have lots of opportunity in all of those.
Speaker Change: And so there's lots of customers to try to convince to take advantage of it, and we're going to continue.
Speaker Change: Investing in the services and adding new features, whether it's News+, Music, or Arcade.
Speaker Change: That's what we're going to do. Keep in mind that...
Speaker Change: for us.
Speaker Change: We're more focused on being best than being most.
And so in some cases, not in every case, some of the services that you, the majority of the services that you mentioned are not cross-platform. We make them for our customers only.
Speaker Change: And so that, in some cases, changes the person who's going to sell the most, perhaps.
Speaker Change: But that's our objective is to make the best.
Speaker Change: Okay, thanks. And then, Luca, one piece of unfinished business was your pledge to get to a net-neutral cash position. And over the last two years, you've stayed around $50 billion.
Speaker Change: of net cash. We've clearly seen instances in the past where elevated marketing spend or other programs brought increases in market share. I guess my question, looking back on your tenure, is at your scale now of $57 billion of OpEx, do you still see incremental ways to put that cash to work in the business?
Speaker Change: or will we just continue to see increased shareholder returns?
Speaker Change: Well, obviously, as you've seen, our OpEx has gone up over the years. We've also seen at the same time a significant expansion in gross margin, maybe to a level that I would have not expected a few years ago.
Speaker Change: but we've done a very good job on a number of fronts. And so...
Speaker Change: I would say we, when we plan, every time we plan for the upcoming year, we think about all the different areas where we can deploy our resources and we make them available to grow the business.
Speaker Change: I think we've done very well over the long term, but our fundamental philosophy is to look after the business first, and then if we have excess cash...
Speaker Change: We will continue to return it to our shareholders and the plan has worked quite well so far.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you, Richard. We'll take our last question, please, operator.
Speaker Change: Our last question comes from Atif Malik with Citi. Please go ahead.
Atif Malik: Thank you for squeezing me in.
Atif Malik: It seems to us that the spec differentiation between iPhone 16 Pro and base models isn't as big as prior years. All iPhones have new A18, A18 Pro chips, and there wasn't an increase in AFDs versus last year. Can you share with us if there is a shift in your strategy in terms of...
Speaker Change: All right. Sorry, Artef, we'll connect offline.
Speaker Change: Thank you, everybody. A replay of today's call will be available for two weeks on Apple Podcasts as a webcast on apple.com slash investor and via telephone.
Speaker Change: The number for the telephone replay is 866-583-1035. Please enter confirmation code 033-1536 followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific today.
Speaker Change: Members of the press with additional questions can contact Josh Rosenstock at 408-862-1142.
Speaker Change: Financial analysts can contact me, Suhasini Chandramouli, with additional questions at 408-974-3123. Thank you again for joining us.
Speaker Change: Once again, this does conclude today's conference. We do appreciate your participation.