Q1 2025 Apple Inc Earnings Call
Before I talk about our results I would like to take a moment to acknowledge the devastating wildfires that impacted the Los Angeles area. This month.
From our retail teams to Apple TV, plus Apple music fitness plus beats and more.
He is home to many of our team members.
Our thoughts are with everyone, who is beginning the road to recovery.
For our part we are contributing to the relief efforts and we will continue to support our teams and the local community.
Now turning to the quarter.
Today, Apple is reporting revenue of $124 $3 billion for the December quarter up 4% from a year ago and an all time record.
EPS also set an all time record of $2 40.
10% higher year over year.
We achieved all time revenue records across the majority of the countries and regions, we track, including the Americas, Europe, Japan, and the rest of Asia Pacific. We also continue to see momentum in emerging markets setting all time revenue records in a number of markets, including Latin America.
The middle East and South Asia among others.
In services, we achieved an all time revenue record and in the past year, we've seen nearly $100 billion in revenue from our services business.
I'm also pleased to announce that we reached a new record for our installed base with over 235 billion active devices.
In October we released the first set of Apple intelligence features and use English for iPhone, iPad and Mac and we rolled out more features and expand into more countries in December.
Now users can discover the benefits of these new features in the things they do every day.
They can use writing tools to help find just the right words create fun and unique images with image playground in <unk> <unk>.
Handle daily task can seek out information with a more natural and conversational Siri.
Movies of their memories with a simple prompt and touch up their photos with cleanup.
We introduced visual intelligence with camera control to help users instantly learned about their surroundings.
Users can also seamlessly access chat GPT across iOS, iPad OS and Mac OS and we were excited to recently began our international expansion with Apple Intelligence now available in Australia, Canada, New Zealand, South Africa, and the UK.
We're working hard to take Apple intelligence, even further in April we're bringing Apple intelligence to more languages, including French German Italian and Portuguese Spanish Japanese Korean and simplified Chinese as well as localized English to Singapore and India.
And we will continue to rollout more features in the future, including an even more capable theory.
Apple intelligence builds on years of innovations, we've made across hardware and software to transform how users experience our products.
Apple Intelligence also empowers users by delivering personal contacts that's relevant to them and.
And importantly, Apple intelligence is a breakthrough for privacy NII with innovations like private cloud compute which extends the industry, leading security and privacy of Apple devices into the cloud.
Apple intelligence opens up an exciting new frontier and is already elevating experiences across iPhone iPad and Mac.
We're going to keep investing in innovation and in transformative tools that help users in their everyday lives.
Let me now turn to our results for the quarter starting with iPhone.
IPhone revenue came in at $69 1 billion, reaching.
Reaching all time, iPhone revenue records and dozens of markets and regions.
Our iPhone 16 lineup takes the smartphone experience to the next level in so many ways and Apple intelligence is one of many reasons why customers are excited with.
With the 18 powered iPhone <unk> and iPhone <unk> plus users are getting a big boost in battery life and incredible camera experiences with camera control.
Amazingly powerful iPhone 16 pro models go even further with larger than ever displays and our pro camera system. So advanced it can turn moments and divesture pieces.
And Mac revenue was $9 billion for the December quarter, 16% higher year over year, driven by significant excitement around the world for our latest Mac lineup.
<unk> is more than just a powerful tool, it's a launch pad to enable users to bring their best ideas and boldest creations to lives.
And there are so many reasons to choose Mac from the breathtaking performance of the import family of chips to the groundbreaking and growing capabilities of Apple intelligence.
Every product in the Mac lineup offer something extraordinary whether thats the Super portable Macbook Air.
Powerhouse Macbook pro the worlds best all in one imac or the small wonder that is the Mac mini which is not only stunningly capable, but as our first carbon neutral mark.
All of this is enabled by the unparalleled power of Apple Silicon.
IPad revenue was $8 1 billion up 15% from a year ago, driven by strong interest for our latest products.
We love hearing from customers, who are discovering for the first time the versatility of iPad from the ultra portable iPad mini built from the ground up for Apple intelligence to the powerful in for iPad Pro and a stunningly thin and light designs.
IPad is therefore, our users whenever they need it and wherever they go and we are pleased to see so much excitement and enthusiasm for our lineup.
Wearables home and accessories revenue came in at $11 7 billion.
With its most advanced display yet in a thinner more comfortable design. The all new Apple Watch series 10 is the perfect companion to help users pursue their health and fitness goals. This year.
From the powerful vitals app to more customizable activity rings users have an ever increasing set of innovative health tools at their fingertips and watch us 11.
Health innovation has long been a focus for us and we're committed to continuing to advance. This work because we know how much it matters to our users.
We've introduced new hearing health features on Airpods pro two.
And new sleep apnea notifications on Apple watch are also helping users learn of a potentially serious condition that is thought to affect up to 1 billion people worldwide.
During the quarter. We also brought Apple vision, Proto even more countries, enabling more customers to discover the magic of spatial computing.
Users are enjoying incredible immersive entertainment experiences and powerful new features and enhancements to Mac virtual display.
Vision Pro is also supercharging, the creative process and the incredibly talented director John <unk> recently shared how it is extraordinary capabilities helped them bring the movie Wicked to life.
Turning to services, we set an all time revenue record of $26 3 billion for the December quarter growing 14% from a year ago.
We set all time records in the Americas, Europe, and rest of Asia Pacific and a December quarter record in Japan.
Five years since launch Apple TV plus continues to be home to incredible storytelling that viewers love.
There's nothing quite like the anticipation that comes when a fan favorite returns and we were thrilled to debut the second season of severance earlier this month.
We have so much in store for our subscribers this year with new shows like the studio and your friends and neighbors.
And we can't wait for the Premier of Formula One starring Brad Pitt on June 27, which will take viewers inside the sport in a truly unprecedented way.
We're excited that Apple TV plus continues to draw attention and accolades to date Apple TV plus productions have earned more than 2500 nominations and 538 wins.
During the quarter. We were also excited to launch a new find my service that can help our users when they lose their luggage.
For the first time, if you put an air tag in your suitcase youll be able to share its location information with many major airlines. So they can quickly track down your bags that they get lost.
Turning to retail our teams went above and beyond to help customers find the perfect gift throughout the holiday season.
We also celebrated openings of new stores in China, Spain, and the U S.
And we were excited to announce plans to connect with even more customers. This year by adding a fifth store in the UAE and bringing our online store to Saudi Arabia. This summer.
We can't wait to welcome customers to the first of several flagship store locations in Saudi Arabia that were opening beginning in 2026.
I just had the chance to visit both countries last month, and I had a great time meeting with customers and team members.
There is an incredible energy and passion for technology in these growing markets.
Every day I get deeply moving notes about the many ways our technology is enriching our users' lives.
We recently got a note from a customer who put his watch on his father's wrist when he feared something was wrong with him.
The watch alerted them that the father was in Afib and they were able to get them to the hospital for potentially life saving treatment.
Another user put his new watch on for the first time and within 15 minutes was notified of a low heart rate that led to a necessary pacemaker.
And there are so many touching notes around the profound impact of our new hearing health feature.
Our recent user who told me it had changed her life, allowing her to take part in conversations where their children and grandchildren.
These are the kind of stories that reminds us of how profoundly important our work is and it drives us to innovate each and every day.
At Apple the future is full of promise and potential we're always searching across the world of possibilities finding those places where we can do the most good and putting all of our energy and ingenuity in making something special.
Kevin: With that I'll turn it over to Kevin.
Kevin: Thanks, Tim and good afternoon, everyone.
Kevin: I'm going to cover the results for the first quarter of our fiscal year.
Kevin: We are very pleased to report an all time high for revenue for December quarter revenue of $124 3 billion.
Kevin: Up 4% year over year.
Kevin: We achieved all time revenue records in the Americas, Europe, Japan, and rest of Asia Pacific and grew and the vast majority of markets we track.
Kevin: Products revenue was 98 billion.
Kevin: Up 2% year over year, driven by growth from iPad and Mac.
Kevin: Thanks to our incredible customer satisfaction and strong loyalty our installed base of active devices reached an all time high across all products and geographic segments and is now over $2 35 billion active devices.
Kevin: Services revenue reached an all time record of $26 3 billion.
Kevin: Up 14% year over year.
Kevin: We grew in every geographic segment and achieved all time records in both developed and emerging markets.
Kevin: Company gross margin was 46, 9%.
Kevin: At the high end of our guidance range and up 70 basis points sequentially, primarily driven by favorable mix.
Kevin: Products gross margin was 39, 3% up 300 basis points sequentially, primarily driven by favorable mix and leverage.
Kevin: Services gross margin was 75%.
Kevin: Up 100 basis points sequentially.
Kevin: Primarily driven by mix.
Kevin: Operating expenses of $15 4 billion landed at the midpoint of our guidance range and up 7% year over year.
Kevin: This strong business performance resulted in all time records for both net income at $36 3 billion and diluted earnings per share of $2 40.
Kevin: Up 10% year over year.
Kevin: Operating cash flow was also strong at $29 9 billion, which.
Kevin: Which included the impact of the $11 9 billion, we paid during the quarter in connection with the state aid decision.
Kevin: Now I'm going to provide some more details for each of our revenue categories.
Kevin: IPhone revenue was $69 1 billion.
Kevin: Roughly flat to the prior year, we grew in the majority of markets. We track and reached all time revenue records in several developed markets, including Canada, Western Europe, and Japan and in emerging markets like Latin America, the Middle East and South Asia.
Kevin: The iPhone active installed base grew to an all time high in total and in every geographic segment.
Kevin: We also set an all time record for upgrader.
Kevin: According to a recent survey from Cantor during the December quarter, iPhone was the top selling model in the U S Urban China, India, The UK, France, Australia and Japan.
Kevin: We continue to see high levels of customer satisfaction in the U S at 96% as measured by four or 501 research.
Kevin: Mac generated $9 billion in revenue.
Kevin: Up 16% year over year we.
Kevin: We saw strength across our lineup from the new Mac mini to the latest Macbook Air and Macbook Pro models. This.
Kevin: This incredible performance was broad based with double digit growth in every geographic segment.
Kevin: With our latest advances in Apple silicon and our fastest neural engine ever customers are able to take advantage of the full capabilities of AI and Mac.
Kevin: The Mac installed base reached an all time high and we saw double digit growth for both upgrader and customers are new to the Mac.
Kevin: Additionally, customer satisfaction in the U S was recently measured a 94%.
Kevin: IPad revenue was $8 1 billion up.
Kevin: Up 15% year over year, driven by the new iPad mini and latest iPad air.
Kevin: The iPad installed base reached another all time high and over half of the customers you purchased an iPad during the quarter were new to the product.
Kevin: Customer satisfaction was at 96% in the U S based on the latest reports from <unk> research.
Kevin: Wearables home and accessories revenue was $11 7 billion down.
Kevin: Down 2% year over year customer.
Kevin: Customers are excited about the new Airpods for and the latest hearing health features and Airpods Pro two and watch although we faced a difficult compare against to watch altra to launch last year. The Apple watch installed base reached a new all time high with over half of customers purchasing an Apple watch during the quarter being new to the product.
Kevin: Customer satisfaction for Washington, The U S was reported at 94% or.
Kevin: Our services revenue reached an all time high of $26 3 billion.
Kevin: Up 14% year over year services continues to see strong momentum and the growth of our installed base of active devices gives us great opportunities for the future.
Kevin: We also see increased customer engagement with our services offerings, both transacting and paid accounts reached new all time highs with paid accounts growing double digits year over year.
Kevin: Paid subscriptions also grew double digits, we have well over 1 billion paid subscriptions across the services on our platform.
Kevin: We remain focused on improving the breadth and quality of our services offerings from new games on Apple arcade two exciting new programming on fitness plus and the continued expansion of features like tap to pay now live in 20 markets.
Kevin: Turning to enterprise, we've seen businesses continue to expand their deployments of our products and services Deutsche Bank launch. It's Mac is choice program for their developers and also issued the latest Macbook air as a standard computer for their entire mortgage lending division and.
Kevin: We're excited to see leading enterprises, such as SAP leverage Apple intelligence in the U S. With features like writing tools summarize and priority notifications to enhance both the employee and customer experiences.
Kevin: We also see strong demand in our emerging markets. For example, the motto a leading food ordering and delivery company in India has deployed thousands of Max across their workforce to foster innovation.
Kevin: Envision pro continues to see more use cases, and enterprise with Cisco's, new spatial meetings, delivering a fully immersive video conferencing experience for remote collaboration and learning.
Kevin: Let me quickly summarize our cash position and capital return program we.
Kevin: We ended the quarter with $141 billion in cash and marketable securities, we repaid $1 billion in maturing debt and decrease commercial paper by 8 billion.
Kevin: Resulting in $97 billion in total debt.
Kevin: Therefore, net cash at the end of the quarter was <unk> $45 billion.
Kevin: During the quarter, we returned over $30 billion to shareholders.
Kevin: This included $3 9 billion in dividends and equivalents and $23 $3 billion through open market repurchases of 100 million Apple shares.
Kevin: As usual, we will provide an update to our capital return program. When we report results for the March quarter.
Kevin: As we move ahead into the March quarter I'd like to review our outlook, which includes the types of forward looking information that <unk> referred to at the beginning of the call.
Kevin: The color we are providing today assumes that the macroeconomic outlook doesn't worsen from what we're projecting today for the current quarter.
Kevin: As the dollar has strengthened significantly we expect foreign exchange to be a headwind.
Kevin: And to have a negative impact on revenue of about two five percentage points on a year over year basis.
Kevin: Despite that headwind, we expect our March quarter total company revenue to grow low to mid single digits year over year, we expect services revenue to grow low double digits year over year. When you remove the negative impact of the foreign exchange headwinds I described earlier the year over year growth rate will be comparable to that of the December quarter.
Kevin: We expect gross margin to be between 46, 5% and 47, 5%.
Kevin: We expect operating expenses to be between $15 1 billion and $15 3 billion.
Kevin: We expect <unk> to be around negative $300 million, excluding any potential impact from the mark to market and minority investments in our tax rate to be around 16%.
Kevin: Finally today, our board of directors has declared a cash dividend of <unk> 25 per share of common stock payable on February 13th 2025 to shareholders of record as of February 10th 2025.
Kevin: With that let's open the call to questions.
Kevin: Thank you Kevin we ask that you limit yourself to two questions. Operator may we have the first question. Please.
Kevin: Certainly we will go ahead and take our first question from Erik Woodring with Morgan Stanley. Please go ahead.
Speaker Change: Great guys. Thanks, so much for.
Speaker Change: For taking my questions Tim.
Speaker Change: In your prepared remarks.
Speaker Change: You had noted that iPhone 16 models are selling better in markets, where Apple intelligence, it's available and I'm. Just wondering if you could double click on that comment a bit and share any other details you believe could better help us understand how Apple intelligence is really impacting iPhone demand <unk>. What features do you find that users are you.
Speaker Change: Using most often already and then I just have a quick follow up thank you.
Speaker Change: Yes, Eric Hi, it's Tim.
Speaker Change: We did see.
Speaker Change: The markets, where we had rolled out Apple intelligence that the year over year performance on the iPhone <unk> family was stronger than those where Apple intelligence was not available in terms of the features that people are using.
Speaker Change: They are using all of the ones that I had referenced in my opening comments from writing tools to image playground and Jen Margie.
To visual intelligence.
Speaker Change: And more and so we see all of those being used the cleanup is another one that has that is popular in PS.
Speaker Change: People love seeing that when demo in the stores as well.
Speaker Change: We only had two.
Speaker Change: 225 weeks or so during the December quarter of the second release of <unk> two.
Speaker Change: And.
Speaker Change: Then only had.
Speaker Change: The U K and the other.
Speaker Change: English language countries.
Speaker Change: The two and half weeks and so we've got.
Speaker Change: Just the early indications at the moment.
Speaker Change: But we got it that's really helpful.
Ed: Hi, Ed.
Ed: Okay. Thank you for that color that's helpful.
Ed: Then.
Ed: If we just touch on on China, obviously in the news fairly frequently if we if we set aside China macro which I understand is still challenging can you maybe talk about the headwinds that apple faces whether that.
Ed: Shifting preferences for western technology brands in favor of domestic vendors or is this just a function of not necessarily having apple intelligence available with the iPhone 16, which is.
Ed: Not necessarily helping replacement cycles, just just maybe double clicking on what you think what you said.
Ed: And what you are hearing in China as a regard as it relates to the IHOP. Thanks. So much yes sure. If you look at our greater China revenue for the quarter, we were down 11%.
Ed: Year over year.
Ed: And over half of the decline that we experienced.
Ed: It was driven by a change in channel inventory front.
Ed: From the beginning to the end of the quarter.
Ed: And.
Ed: Of course on the.
Ed: Apple intelligence side, we have not rolled out in China.
Ed: And as we just talked about we did see.
Ed: Better results in the markets that we had rolled out in the markets, we hadn't rolled out.
Ed: And of course, it's the most competitive market in the world and so all of those things are true in terms of the.
Ed: The macro situation there was.
Ed: Fiscal stimulus or subsidy announced in very recently and in January did not affect.
Ed: The December quarter.
Ed: There were some provincial subsidies in the December quarter, but the national program.
Ed: Was announced I believe on January 20th.
Ed: And it does cover the.
Ed: <unk>.
We have products in from smartphones to tablets, and Pcs and smart watches.
Ed: Up to certain maximum price point, and so we do see fiscal stimulus occurring and we will be glad to talk about what that looks like on the next call.
Speaker Change: Great. Thanks, so much Tim good luck. Thank you. Thank.
Speaker Change: Thank you Eric operator can we have the next question. Please.
Speaker Change: Our next question is from Ben Reitzes with Melius. Please go ahead.
Speaker Change: Hey, guys. Thanks, a lot for the question and Hey, Tim I wanted to ask you.
Speaker Change: This one was coming but there.
Speaker Change: There is a perception that you are.
Speaker Change: A big beneficiary of lower cost of compute and.
Speaker Change: I was wondering if you could give your worldly perspective here on the deep sea situation if.
Speaker Change: You are.
Speaker Change: Going to if you have anything has happened to change your views in terms of a tailwind to margins and your ability to execute even.
Speaker Change: Due to the potential for cost to come down due to that development and probably what was going to happen anyway, but I'd love your perspective on that and then I have a quick follow up thanks sure in general I think innovation that drives efficiency is a good thing.
<unk>.
Speaker Change: And that's what you see in our model our tight integration of Silicon and software I think we will continue to serve us very well.
Speaker Change: As you know, we do things on the device and we do things in the private cloud.
Speaker Change: And which.
Speaker Change: Mimics from architectural point of view, the what happens on device.
Speaker Change: And from a Capex point of view.
Speaker Change: We've always taken a very prudent and deliberate approach to our to our expenditure and we continue to leverage a hybrid model, which I think continues to serve us well.
Speaker Change: Great Alright, Thanks, Tim and then.
Speaker Change: Just with regard to the iPhone trajectory.
Speaker Change: Do you feel like.
Speaker Change: I guess what.
Speaker Change: You, obviously don't talk about new products and stuff like that but do you feel that there's a lot of room for form factor innovation in the future or do you feel that the.
Speaker Change: The current lineup kind of.
Speaker Change: <unk>, where youre going.
Speaker Change: I guess.
Speaker Change: Without pulling punches wondering if your thought.
Speaker Change: In terms of the phone innovation, if theres a lot more to come and you could see the kind of current market changing a bit over the next two to three years. I think then I think theres a lot more to come and I could not feel more optimistic about our product pipeline.
Speaker Change: So I think there is a lot a lot of innovation left on the smartphone.
Tim: Thanks, a lot Tim Yep. Thank you.
Speaker Change: Thank you Ben operator could we have the next question. Please.
Speaker Change: Our next question is from Michael <unk> with Goldman Sachs. Please go ahead.
Michael: Good afternoon. Thank you for the question I have two as well.
Michael: First it was encouraging to hear about the record for iPhone upgrade orders, which I think is something you haven't said.
Michael: For about a year now and I was wondering if you could talk a little bit about what you would attribute this upgrade strength too.
Speaker Change: Has apple intelligence played a role in helping upgrades in the market that you've watched and thanks.
Speaker Change: Yes. Thank you for the question. If you look at iPhone, We did set an all time record for upgrader. So we've never seen a higher level of upgrade or as before.
Michael: The installed base hit a new all time high as well.
Michael: And if you look at the 16 compared to the 15 from launch which occurred as you know in September. So this is across now.
Michael: Two quarters from September to the end of the December fiscal quarter. The 16 outperformed the 15.
Michael: And so I think you can conclude from that that there are compelling reasons to upgrade and.
Michael: And.
Michael: And in the markets, where we had launched Apple intelligence they outperformed the markets that we did not.
Michael: So a lot of great. Thank you Timna, yes lots of good color there.
Timna: Great. Thank you Tim that's very clear and then I had one about the iPad pro and for the thinner version.
Timna: I was just wondering if you could talk about that thin form factor for the iPad pro.
Timna: How did it help iPad sales overall and what is your kind of market and consumer research tell you about.
Timna: How consumers valued that.
Timna: In product form factor. Thank you.
Timna: It's a good question iPad overall grew 15% for the quarter and it was.
Timna: Board driven by iPad Air.
Timna: And the entry level iPad than it was the top level iPad.
Timna: But.
Timna: Overall, we could not be more pleased with the iPad category growing <unk>.
Timna: 15%.
Timna: Great achievement for the quarter and probably what is most important is that over half of the sales in the December quarter went to customers who were new to iPad. So that tells us that.
Timna: There is a.
Timna: A good amount of customers there to a trial.
Timna: Thank you very much Tim yeah. Thank you.
Speaker Change: Thanks, Mike Operator can we have the next question. Please.
Our next question is from Amit <unk> from Evercore. Please go ahead.
Speaker Change: Yep.
Speaker Change: Afternoon, everyone op too as well.
Speaker Change: To start with you folks are seeing some very robust growth trends in emerging markets right now for Apple products.
Speaker Change: Could you just at a high level just talking to the durability of growth that you see in emerging market and then do you think the summation of these emerging markets are starting to get big enough or perhaps under grow fast enough that you can actually offset some of the China had been.
Speaker Change: Sure.
Speaker Change: We have.
Speaker Change: Great results in a number of emerging markets.
Speaker Change: As you know from past calls.
Speaker Change: Particularly keen on India.
Speaker Change: India set a December quarter record.
Speaker Change: During the quarter and we are opening more stores, there we've announced that we're going to open four new stores there.
Speaker Change: We also the iPhone was the top selling model in India for the quarter and.
Speaker Change: It's the second largest smartphone market in the world and the third largest for Pcs and tablets and so there is a huge market.
Speaker Change: And we are we have very modest share in these markets and so I think there's lots of upside there and thats just one of the emerging markets.
Speaker Change: And then maybe I'll add amit than the emerging markets. We're also seeing double digit growth in the installed base both in total and for the iPhone as well. So that's also an encouraging sign.
Speaker Change: <unk>.
Perfect. Thank you and then just a question on gross margin for the March quarter.
Speaker Change: You folks are guiding gross margin is flattish on a sequential basis.
Speaker Change: I think it tends to be guided up a little bit 50 basis points sequentially can you just touch on like what are the offset to the puts and takes on gross margin and then Kevin maybe you can just talk about is FX, having an outsized impact on your margin profile as well in March.
Kevin: Yes, Amit let me take that one.
Speaker Change: Mentioned in my remarks, what we're guiding to a 46, 5% to 47, 5%. So we think we're very pleased with that level of guidance.
Speaker Change: As you mentioned, there's always puts and takes we do think theres going be some FX headwinds, which we talked about that's going to affect our revenue growth as well.
Speaker Change: To have an impact here on the margin a sequential impact on margins, but we think thats going to be offset by.
Speaker Change: Favorable cost in the relative mix of services.
Speaker Change: We also as you know when we move from Q1 to Q2, especially on the product side, because Q1 is such a large quarter for our products business. We do have a loss of leverage. So there are some puts and takes and I think we feel good about the range. We think it's a very very strong strong guide for gross margin.
Amit Than: Thanks, Amit operator could we get the next question. Please.
Amit Than: Our next question is from <unk> Mellon with Bank of America. Please go ahead.
Speaker Change: Yes. Thanks, so much Tim I wanted to follow up on your comment about channel inventory in China. I was wondering if you could maybe address more broadly of channel inventory across the different product lines and regions do you feel they are elevated or out of range in any other regions and given the clearing event, but.
Amit Than: Kind of happened in China, I guess in the quarter should we think of a more normal progression.
Amit Than: And quarter into the March quarter in China in particular, and I will follow.
Amit Than: Yes, I don't want to project.
Amit Than: Sales for the current quarter by region, but if you if you look at the channel inventory and look at iPhone in the aggregate so on a worldwide basis.
Amit Than: We're very comfortable with our channel inventory position.
Amit Than: <unk>.
Amit Than: In China My point was that our channel inventory reduced from the beginning of the quarter to the end of the quarter and that was over half of the reduction.
Amit Than: Reported results and so if you look part of the reason for that is.
Amit Than: That our sales were a bit higher than.
Amit Than: Then we forecasted them to be toward the end of the quarter.
Amit Than: And so we ended a little leaner than we had expected to.
Amit Than: Okay, that's very clear thank you.
Amit Than: Then maybe as my follow up.
Speaker Change: Your services growth has been very strong and I know you've kind of been navigating some pretty challenging regulatory.
Amit Than: Burdens on the business globally. So.
Amit Than: How should investors think about maybe either top line or margin headwind that let's say are currently absorbing in yogurt in your results that could potentially maybe better or worse in a more balanced regulatory environment. Thank you.
Amit Than: Yes.
Yes.
Amit Than: So one I just wanted to kind of reiterate the fact that our services business at an all time record for this.
Amit Than: <unk> quarter at 14% and that was one of the strength that we saw across all geographic segments and also it was very broad based across all of our services. So we have as you know.
Amit Than: Broad services portfolio and so we do see.
Amit Than: Good momentum across across the board and as well, we continue to see increasing engagement across the customer base across all of the service offerings, both transacting and paid accounts, we talked about reaching all time highs and we have over now 1 billion paid subscriptions across our services platform.
Amit Than: Alright.
Speaker Change: Thanks, Bonzi operator could we get the next question. Please.
Speaker Change: Our next question is from stomach chatterji with J P. Morgan. Please go ahead.
Stomach Chatterji: Hi, Thanks for taking my questions I guess, the first one if I can I mean, you had a great quarter on the Macs and ipads Booth and I'm just curious in terms of if you can help us think about the sustainability of this double digit growth that you saw in both the product lines and good morning Christopher.
Stomach Chatterji: We are talking about Apple intelligence sort of influencing volumes on iphones, but any thoughts on sort of how what.
Stomach Chatterji: What does that look like in terms of volumes for Max for example, where I think there's a lot of conversation R&D ipc's, how youre thinking about the impact of kind of a quick follow up thank you.
Speaker Change: Yes, if you look at Mac Mac was up 16% and an iPad we were up 15%.
Stomach Chatterji: The Mac was driven by the <unk>.
Speaker Change: Very.
Speaker Change: Strong uptake on our new products.
Speaker Change: During the quarter.
Speaker Change: And the continued success of the Macbook Air and so as you know we launched.
Speaker Change: For base, Macbook Pro and imac and a Mac mini during the quarter.
Speaker Change: We believe we've got the best AIP see out there.
Speaker Change: For running workloads the silicon.
Speaker Change: In the Mac is and it has been for several years now.
Speaker Change: Designed by Us and <unk>.
Speaker Change: Really designed for these workloads and.
Speaker Change: I don't want to project at the <unk>.
Speaker Change: Category level for the future.
Speaker Change: But we are we're incredibly pleased with both the Mac and the iPad for the quarter.
Speaker Change: Okay.
Speaker Change: I'm going to use your <unk>.
Speaker Change: Discussion about India, those strong emerging market.
Speaker Change: I'll sort of ask you about the pump supply chain planning in terms of how much of the supply chain planning that you're doing is more of an inflection of the growth expectations from that market.
Speaker Change: In terms of more diversification of the supply chain and how should we sort of think about that.
Speaker Change: Thank you Nathan that particular country.
Speaker Change: Yes, if you look at the.
Speaker Change: The manufacturing we do there we do.
Speaker Change: Do manufacturing both for the domestic market and we export.
Speaker Change: And so in our business needs.
Speaker Change: Certain economies of scale for it to make sense to manufacture.
Speaker Change: In country and so.
Speaker Change: That really means that we're going to be both.
Speaker Change: Our use for the domestic market and an export market.
Speaker Change: Okay. Thank you yeah. Thanks.
Speaker Change: Thank you operator could we get the next question. Please.
Our next question is from David <unk> with UBS. Please go ahead.
David: Great. Thanks, guys for taking my question. So maybe you can just view I'm trying to think about your commentary around Apple intelligence being sort of a momentum driver for the iPhone business, but when I think about your kind of framework for the March quarter, if I kind of adjust for channel inventory over the last couple of years kind of feels like your iPhone revenue for the March quarter is going to be relatively.
David: Similar to the quarter two years ago, and even the quarter last year. So how do we square kind of the momentum versus kind of the iPhone business effectively really kind of unchanged over the last couple of years and then second when I think about kind of the gross margin profile of the business and obviously you've done a great job in taking gross margins up where do you think we sit in terms of.
David: On the services side at least where margins could go it looks like you know the 75% margin spending incredibly successful quarter, but just trying to get a sense for where do you think this number could go over that over the intermediate term. Thank you.
David: Yes, if you if you look at Apple intelligence.
David: My point earlier was that markets, where we had rolled out Apple intelligence.
David: During the Q1 period.
David: Performed better on a year over year basis, the markets, where we had not.
David: And so that that gives us.
David: It's a positive.
David: Cater that we were pleased with.
There are many compelling reasons to upgrade and the other thing I would I would say that I think I've mentioned earlier is that if you look at it from a <unk>.
David: Launched to the end of the December quarter, and so that goes back to September the <unk>.
David: <unk> family is outperforming the <unk> family.
David: And so I think those are.
David: Two good data points, our next round of.
David: Language Rollouts will be in April.
David: And so it will be it.
David: In our Q3.
David: Quarter.
David: And I'll, let Kevin take the gross margin question, Great Hi, David how are you.
David: So on the services gross margin I think maybe just stepping back a second.
David: Services business in general in aggregate as accretive to the overall company margin and one of the things as an important reminder, we have a very broad services portfolio and those businesses have very different margin profiles and so I think one is because of the nature of those businesses and in part also because of the way we account for them and so one of the big factors.
David: That drives the services gross margin the relative performance of those different businesses within the portfolio. We also have the dynamic of some scale businesses like payment services icloud that are actually growing and then when we add incremental users those end up being accretive to margins as well and so in general what we saw in the December quarter was nice momentum across our.
David: Our entire services business.
David: That allows us to deliver that 75% margin at the services level.
David: Our guidance takes into consideration.
David: But where we think we're going to ask from a company standpoint of $46 $5 to $47 five which again, we think there's a strong guide.
David: Great. Thanks, guys alright.
Speaker Change: Alright. Thank you David operator could we have the next question. Please.
Speaker Change: Our next question is from Chris Dankert with TD Cowen. Please go ahead.
Chris Dankert: Yes, hi, Thanks for taking my question I also checked two of them one of the first one for Tim.
Chris Dankert: You had very strong growth, 16% year over year last quarter, just wondering how much of that is driven by.
Chris Dankert: Some of the Max silicate innovation versus <unk>.
Chris Dankert: The placement cycle formats.
Speaker Change: I don't know the answer to your question precisely, but I think it is a combination of.
Speaker Change: These products are so compelling.
Speaker Change: The <unk> based products are so compelling.
Speaker Change: That it's driving both upgrades at.
Speaker Change: At the double digit level, and it's driving switchers at a double digit level and so we're seeing both.
Speaker Change: Come out and I think it's just because of the compelling products.
Speaker Change: Got it got it thanks to the gym and the follow up for Kevin on.
Speaker Change: The gross margin.
Speaker Change: I want to ask you one more on the product side last quarter, you had 39, 3%, which is very strong similar to a year ago period.
Speaker Change: How much more level do you have on the product side to improve the gross margin or do you think.
Speaker Change: Among the more new AI related devices.
Speaker Change: More upside to gross margin from here on the project site.
Chris Dankert: Yeah, Thanks, Chris for the question.
Speaker Change: So on the product side as you mentioned, we had pretty strong sequential improvement 300 basis points.
Speaker Change: For the December quarter that was really driven by we talked about favorable mix and.
Speaker Change: <unk> leverage as you know in Q1 again.
Speaker Change: Last quarter from any products and so we tend to benefit from the leverage.
Speaker Change: We get from that higher volume I would say in general our gross margin for products is driven by a number of factors one of them is the various product launches that we have different products you have different margin profiles and so that mix does make a difference and in particular, what we're seeing is for example, many of our of our mixing.
Speaker Change: Costs like filing for example, we're seeing customers gravitate towards our pro products.
Speaker Change: Because of things like affordability that allows our customers to get.
Speaker Change: Our best products, which have been.
Speaker Change: Gross margins, so we're continuing to see that trend.
Speaker Change: The impact of those in the December quarter, as well I think we're in a favorable commodity environment from a cost standpoint, and so we're benefiting from that as well.
Speaker Change: Per quarter.
Speaker Change: And then that's going to be as we talked about we're going to have a foreign exchange headwind heading into the March quarter, but that's contemplated in the guidance range that we gave in the $46 five to 47, 5%.
Speaker Change: Okay. Thanks, Kevin Thanks, Jim.
Speaker Change: Thank you, Chris operator could we get the next question. Please.
Richard Kramer: Our next question is from Richard Kramer with Arete Research. Please go ahead.
Richard Kramer: Thanks very much my first question is for Tim I'd like to ask about what might accelerate the pace of Apple intelligence adoption I guess do you see this as simply as a question of time item launch more markets and languages or increase the percentage of installed base devices that can support it or is it a question of money I E shifting R&D or marketing.
Richard Kramer: Spend towards AI and based on other prior Apple services do you expect to sort of tipping point, where adoption will go mainstream.
Richard Kramer: I do believe it will go mainstream.
Richard Kramer: Getting feedback from people are using different features today and this is keep in mind that on the iPhone side of our <unk>.
Richard Kramer: Business you either have to have an iPhone 15 pro or iPhone 16 to use Apple intelligence.
And so as that base grows.
I think the usage will continue to grow and I think I know from my own personal experience. Once you start using the features.
Richard Kramer: You can imagine not using them anymore.
Richard Kramer: I know I get hundreds of emails a day.
Richard Kramer: The summarization function is is so important.
Richard Kramer: So I think it's a combination of that and of course in April we rollout a whole series of new languages that we had that we had mentioned and so the base grows further.
Speaker Change: Okay. Thank you and then Kevin one of Lucas legacies was really getting Apple to record margin levels and also maintaining very consistent pricing across the product range, but taking the current high levels of profitability is fairly stable one observations might you share about price sensitivity of users and whether having a wider.
Speaker Change: The range of pricing across the products, Mike unlocks potentially further market share gains or boost overall product growth.
Speaker Change: Yes, it's a good question I think one I don't think we are in early depart from what served us pretty well now I mean, we always take into consideration.
Speaker Change: Looking at short term.
Speaker Change: And presently in short term the long term I think we've had a pretty disciplined pricing strategy, which has served us pretty well and I think we're going to continually kind of stick with that as far as I can tell.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you Richard operator could we get the next question. Please.
Malik: Our next question is from <unk> Malik with Citi. Please go ahead.
Speaker Change: Hi, Thank you for taking my question.
Malik: How do you guys see the potential tariff impact to your products.
Speaker Change: <unk> demand under Trump two point, though you guys did find under one point too.
Speaker Change: We are monitoring the situation and.
Speaker Change: Don't have anything more to add than that.
Speaker Change: Great and Tim as a follow up there is a lot of discussion on the <unk> AI the use of agent.
Speaker Change: Do you guys see the upgraded theory.
Speaker Change: Expected in April as something that will.
Speaker Change: Let's say be the killer application among the suite of.
Speaker Change: Features that you have announced an apple intelligent.
Speaker Change: I think the killer feature is different for different people and but I think for most theyre going to find that theyre going to use many of the features every day and certainly one of those is the is the.
Speaker Change: It's theory and that will be coming over the next.
Speaker Change: Several months.
Speaker Change: Thank you.
Speaker Change: Alright. Thank you artist operator could we please get the last question.
Speaker Change: Our last question is from Ben Bollin from Cleveland Research Company. Please go ahead.
Ben Bollin: Good evening, everyone. Thanks for taking the question.
Speaker Change: Tim Im interested in your thoughts.
Speaker Change: How you would have us think about the average useful life of these devices in the wild.
Speaker Change: And in particular I'm curious if.
Speaker Change: If you look at the strong the strength you saw in fiscal 'twenty one.
Speaker Change: How that might support accelerated refresh opportunity into the future.
Ben Bollin: Yes, Ben I think it's different for different types of users I mean.
Ben: You have.
Very early adopter kind of users that are very quick to jump on the latest technology.
Ben: Upgrade very frequently and then you have people that are on the.
Ben: Entire opposite side of that barbell and most people are between those.
Ben: Two two points.
Ben: No.
Ben: I do think there were lots of units that are sold during the COVID-19 period of time, and it's a huge opportunity for us.
Ben: As a company to for more than one of the product categories.
Speaker Change: That's it for me thanks, Tim Thank you.
Ben: Alright.
Ben: Thanks Ben.
Ben: Okay.
Ben: Okay.
Speaker Change: A replay of today's call will be available for two weeks on Apple podcasts or as a webcast on Apple Dot com slash investor and via telephone number for the telephone replay is 8665831035. Please enter confirmation code 703 nine.
Speaker Change: <unk> followed by the pound sign these replays will be available by approximately five PM Pacific time today.
Speaker Change: Members of the press with additional questions can contact Josh Rosenstock at 40886 to 1142 and financial analysts can contact me two huston each under mally with additional questions. At 408 970 43123, Thanks again for joining us here today.
Speaker Change: <unk>.
Speaker Change: Once again this does conclude today's conference we do appreciate your participation.
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