Apple earnings live updates: Stock falls after earnings beat on China weakness

Apple wraps the call after much discussion about how its AI efforts will shape the upcoming months for the company.

The end of the call also concludes CFO Maestri's participation in future earnings calls.

The stock was trading down around 2% as the call ends.

The recurring portion of Apple's services — think subscriptions like Apple TV+ — is growing faster than the transactional services, Maestri tells analysts.

Apple's services business hit a $100 billion run-rate, a new milestone.

Cook says he doesn't want to speculate on an ongoing legal case. "I will save that for another day," he says.

Maestri says Apple has been investing heavily in R&D over the last several years, and its R&D growth has been "significant" over that time.

Apple has also reallocated some of its resources toward AI, he adds.

The "level of intensity toward AI has increased a lot," Maestri says. You might not see the full extent of it because of internal reallocation of Apple's engineering base within the company, he adds.

Cook and Maestri tell analysts that the rollout of Apple Intelligence will take longer than with past software updates that Apple typically launches globally, as the company said at WWDC.

"It's clearly, as you point out, a different cadence, if you will, than we would normally do," Cook says in response to an analyst's question.

"In terms of the demand curve, what we believe is that it's a compelling reason for upgrading," Cook says. "That's both my personal experience and feedback that I'm getting. We'll see. We're not projecting beyond the current quarter, obviously — we just don't do that."

The Apple CEO says he doesn't want to speculate and that he's going to punt on the question.

Cook says China revenue was relatively flat year over year.

The CEO says a key component is the sequential improvement in foreign exchange. "That helped us out. As you know, it's been a headwind that we've been reporting for a period of time," Cook says.

"What else is going on there is that the installed base of active devices reached an all-time high," he says. "We had the top 2 top-selling smartphones in urban China," Cook says, referencing a third-party report. He also points to the level of new customers buying Mac and iPad being "well over 50%."

"Several positive signs there," Cook adds.

"As far as stimulus, it's a clear focus of the team there," Cook says. "But I'm not an economist and don't want to ad-lib on the effect of it."

Cook says upcoming software releases for iOS and Apple Intelligence are "changing my daily life." He says he's excited about the health features — including the sleep apnea feature.

Apple "couldn't be more excited" for its upcoming AI features, Cook says it's a "compelling upgrade reason."

Cook said that iOS 18.1, which comes with Apple Intelligence, is being adopted twice as fast as 17.1.

As far as iPhone 16 demand, that's as specific as Cook seems willing to get.

Cook and Maestri will now answer questions from Wall Street analysts.

Apple doesn't issue complete guidance for the following quarter, but Apple's CFO does provide some color about what the company is expecting for the holiday quarter.

- Revenue to grow in the low- to mid-single digits
-Services revenue to grow similar to what it did in fiscal 2024
-Gross margin between 46% and 47%
-Tax rate to be around 16%

Mac's installed base reached an all-time high, with about half of the customers this quarter being new to Macs, Maestri says.

At the end of his prepared remarks, Cook takes a moment to say that this will be the final earnings call from CFO Luca Maestri, who is transitioning into a different role beginning in January.

Cook thanks Maestri for "shaping Apple as we know it today." Maestri will continue reporting to Cook in a new role as head of Apple's information systems and technology and real-estate development.

His successor in the CFO role will be Kevan Parekh.

Cook says he's already getting feedback calling the hearing test and hearing aid features on the AirPods Pro 2 "life-changing."

"We believe this will make a meaningful difference in user's lives," Cook says.

"Apple Intelligence marks the beginning of a new chapter for Apple innovation," Cook says.

The new iPhone 16, iPad, and Mac lineups get a shoutout for their compatibility with AI.

Cook said ChatGPT integration, a more conversational Siri, and more localized English options are coming in December. And, more Apple Intelligence will roll out in "the coming months."

He also shouts out an all-time revenue record in India during the quarter.

Apple's fiscal fourth-quarter earnings call kicks off with opening remarks from Apple CEO Tim Cook and CFO Luca Maestri. This may be Maestri's last call as he steps down from the CFO role.

Analyst Jacob Bourne at Emarketer, a sister company to Business Insider, said that Apple's earnings "show its resilience in the face of market headwinds, with iPhone demand improving in China where premium models sales surpassed expectations."

"The staggered rollout of Apple Intelligence could curtail some of the device upgrade cycle's momentum, but the combination of robust services revenue growth and healthy iPhone 16 demand positions Apple well for the holiday season," Bourne said.

"Apple is prioritizing execution over speed — a strategy that could prove to be either prudent or potentially costly depending on how quickly competitors advance their AI capabilities. A key question is whether Apple's cautious AI rollout strategy, while potentially dulling the holiday sales potential, might be advantageous by ensuring a better user experience in the long run."

The Apple CEO tells CNBC that iPhone 15 sales were "stronger than 14 in the year-ago quarter, and 16 was stronger than 15."

Apple stock dropped about 1% in after-hours trading after the company reported a profit beat in its fiscal fourth quarter.

Here are the results:

Fourth Quarter

• Revenue: $94.93 billion vs estimate of $94.36 billion

• Products revenue: $69.96 billion vs estimate of $69.15 billion

  • iPhone revenue: $46.22 billion vs estimate of $45.04 billion
  • Mac revenue: $7.74 billion vs estimate of $7.74 billion
  • iPad revenue: $6.95 billion vs estimate of $7.07 billion
  • Wearables, home and accessories: $9.04 billion vs estimate of $9.17 billion
• Service revenue: $24.97 billion vs estimate of $25.27 billion
• Greater China revenue: $15.03 billion vs estimate of $15.8 billion
• Adjusted EPS: $1.64 vs estimate of $1.60
• Total operating expenses: $14.29 billion vs estimate of $14.35 billion
• Gross margin: $43.88 billion vs estimate of $43.44 billion
• Cash and cash equivalents: $29.94 billion vs estimate of $26.04 billion
• Cost of sales: $51.05 billion vs estimate of $50.81 billion
• Total current assets: $152.99 billion vs estimate of $145.08 billion
• Total current liabilities: $176.39 billion vs estimate of $139.88 billion

Source for analyst estimates: Bloomberg

Apple stock traded lower on Thursday, down 1.34% to $227.13 at 3:01 p.m.

The stock decline came amid a broader sell-off in mega-cap tech stocks following earnings reports from Microsoft and Meta Platforms, with shares of both tech firms down about 5%.

The Nasdaq 100 traded about 2.5% lower while the S&P 500 was down 1.5% Thursday afternoon.

With some conflicting views on Wall Street about iPhone 16 demand in recent weeks, Bank of America said investors should "look past the iPhone 16 noise to impact of Apple Intelligence."

"Contrary to every cycle where all the hardware/software functionality is more or less static through the course of the cycle, we view the cycle as more dynamic with more material software updates that increases the value to the user," Bank of America analyst Wasmi Mohan said in a note last week.

Mohan said iPhone demand to pick up over the next few months as Apple's AI features become more robust and expects the company to sell 80 million iPhone units during the holiday season.

Mohan is encouraged by a slightly higher average selling price for iPhones as consumers overwhelmingly continue to gravitate towards the more expensive Pro models.

Bank of America rates Apple at "Buy" with a $256 price target.

Goldman Sachs said it sees "upside to consensus revenue and EPS driven by outperformance in iPhone and Services" in a note last week.

Goldman analyst Michael Ng expects the company to report $1.61 in earnings per share and $94.5 billion in revenue, which would represent year-over-year growth of 6%.

Like other analysts, Ng is focused on the impact of AI and all of the software features Apple is set to release in the next few months.

"Although Apple Intelligence has yet to be a demand driver, we're encouraged by the rollout of Apple Intelligence features with iOS 18.1 (Week of October 28, includes Writing Tools, notification summaries, Clean Up in Photos), iOS 18.2 (currently in beta for est. December release, includes Genmoji, Image Playground, ChatGPT), and iOS 18.4 (est. March 2025 release, more advanced Siri, personalization, on-screen awareness)," Ng said.

Goldman Sachs rates Apple at "Buy" with a $275 price target.

Wedbush analyst Dan Ives isn't budging from him bullish view on Apple heading into the company's financial results.

He argues that the iPhone is on the verge of a supercycle as consumers upgrade their devices to get access to Apple Intelligence features, and Apple will become the first $4 trillion company in 2025.

"We expect a strong iPhone performance for the September quarter and expect a relatively bullish December iPhone demand commentary from Cook & Co. despite many of the bears recently yelling fire in a crowded theater on the strength of iPhone 16 sales," Ives said in a note on Sunday.

Ives says that bearish views on Apple fail to appreciate its installed base of 1.5 billion iPhones that will eventually need to be replaced, as well as the growing Services business that helps monetize the massive user base, and the potential for Apple to be the gatekeeper of AI technologies for a large group of consumers.

Wedbush rates Apple at "Outperform" with a $300 price target.

JPMorgan expects Apple to report a strong fourth-quarter earnings report that will likely beat revenue and profit estimates but that it will also disappoint with weaker-than-expected guidance for the holiday quarter.

"Sell-through for iPhone 16 series started off slower than iPhone 15, and while momentum has improved in recent weeks, the magnitude of the improvement is still putting volumes modestly below last year," JPMorgan analyst Samik Chatterjee said in a Monday note.

Like many analysts on Wall Street, Chatterjee is looking for evidence that AI features will drive a bump in iPhone sales.

JPMorgan rates Apple at "Overweight" with a $265 price target.

4th quarter

• Revenue estimate: $94.36 billion

• Products revenue estimate: $69.15 billion

  • IPhone revenue estimate: $45.04 billion
  • Mac revenue estimate: $7.74 billion
  • IPad revenue estimate: $7.07 billion
  • Wearables, home and accessories estimate: $9.17 billion
• Service revenue estimate: $25.27 billion
• Greater China rev. estimate: $15.8 billion
• EPS estimate: $1.60
• Adjusted EPS estimate: $1.60
• Operating cash flow estimate: $34.66 billion
• Total operating expenses estimate: $14.35 billion
• Gross margin estimate: $43.44 billion
• Cash and cash equivalents estimate: $26.04 billion
• Cost of sales estimate: $50.81 billion
• Total current assets estimate: $145.08 billion
• Total current liabilities estimate: $139.88 billion

Source: Bloomberg