Apple late Thursday delivered a quarter that can only be described as much better than feared. It wasn’t perfect, but it was pretty darn good. Revenue in Apple’s fiscal 2024 fourth quarter, which ended in September, grew 6% year-over-year to a September quarter record of $94.93 billion – outpacing the LSEG estimate of $94.58 billion. Adjusted earnings per share advanced 12% to $1.64 –edging out LSEG’s estimate of $1.60. It’s worth noting that Apple usually doesn’t report on an adjusted basis, however, due to a one-time income tax charge of $10.2 billion resulting from the reversal of the European General Court’s state aid decision, the company opted to provide a reconciliation of this and report the adjusted result, which is what Wall Street will grade the quarter on. Apple Why we own it: Apple’s dominant hardware and growing services businesses provide a deep competitive moat and plenty of bundling opportunities. Management’s net cash neutral strategy provides confidence that free cash flow will continue to fund dividends and buybacks. There’s a reason it’s one of only two “own it, don’t trade it” stocks in the portfolio. Competitors: Samsung, Xiaomi, OPPO, Dell and HP Inc. Most recent buy : April 8, 2014 Initiation : Dec. 2, 2013 Bottom line We are once again reminded why it doesn’t pay to try to game Apple’s quarterly release. For all the fear-mongering we have had to contend with over the past few weeks about just how horrendous this print was going to be, it ended up being a September quarter sales record for the world’s greatest consumer technology company. On the post-earnings call, outgoing CFO Luca Maestri said, “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.” Americas rose 3.9% to $41.66 billion, a tad below estimates. Europe and Rest of Asia Pacific grew and beat expectations. Rest of Asia Pacific is an Apple geographic designation for the region outside Japan and Greater China. Japan grew and beat in the quarter, while Greater China fell 0.3% to $15.03 billion, coming up nearly $1 billion short of expectations. As always, we were pleased to hear that Apple’s installed base of active devices reached yet another all-time high across all products and geographic segments. This is a far more important factor than how many devices are sold in a given quarter. The key to Apple’s success isn’t how many devices it can sell in a three-month period but rather how well it does at increasing the lifetime value of its customers over time. Once Apple sells a device to someone new to the product suite it sets them up to sell more first-time items – it likely starts with an iPhone but half or more of Mac, iPad, and Apple Watch buyers in the quarter were new to the platforms. But that’s just the start of drawing them ever deeper into the ecosystem, and the deeper you get, the higher the switching costs become. We expect that to be even more…
Read More: Apple reports better-than-feared financials, emerging iPhone 16 demand
