Apple Inc. (AAPL) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects strong financial performance with record revenues and EPS growth. Shareholder returns are robust, with substantial share repurchases and dividends. Despite challenges in China, the overall market strategy and product innovation, including Apple Intelligence, are positive. The Q&A reveals optimism about future innovation and growth in emerging markets. Gross margin guidance remains strong, and the company is managing inventory well. The positive outlook and financial health suggest a positive stock price movement, although some caution is warranted due to geopolitical risks and competitive pressures in China.
Key Financial Performance
Revenue $124.3 billion, up 4% year-over-year, driven by all-time revenue records across the majority of countries and regions.
EPS $2.40, up 10% year-over-year, reflecting strong business performance.
iPhone Revenue $69.1 billion, roughly flat year-over-year, with growth in several developed and emerging markets.
Mac Revenue $9 billion, up 16% year-over-year, driven by excitement around the latest Mac lineup.
iPad Revenue $8.1 billion, up 15% year-over-year, driven by strong interest in new products.
Wearables, Home and Accessories Revenue $11.7 billion, down 2% year-over-year, impacted by a difficult comparison against the previous year's launch.
Services Revenue $26.3 billion, up 14% year-over-year, with all-time records in multiple regions.
Gross Margin 46.9%, up 70 basis points sequentially, primarily driven by favorable mix.
Products Gross Margin 39.3%, up 300 basis points sequentially, driven by favorable mix and leverage.
Services Gross Margin 75%, up 100 basis points sequentially, primarily driven by mix.
Operating Expenses $15.4 billion, up 7% year-over-year.
Net Income $36.3 billion, an all-time record.
Operating Cash Flow $29.9 billion, including $11.9 billion paid in connection with state aid decision.
Installed Base of Active Devices Over 2.35 billion, reaching an all-time high.
Total Debt $97 billion, with net cash at $45 billion.
Shareholder Returns Returned over $30 billion to shareholders, including $3.9 billion in dividends and $23.3 billion in share repurchases.
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Operating Highlights
iPhone Revenue: iPhone revenue reached $69.1 billion, setting all-time revenue records in numerous markets.
Mac Revenue: Mac revenue was $9 billion, a 16% increase year-over-year, driven by excitement around the latest Mac lineup.
iPad Revenue: iPad revenue was $8.1 billion, up 15% from a year ago, fueled by strong interest in new products.
Wearables Revenue: Wearables, home, and accessories revenue was $11.7 billion, with new features in Apple Watch and AirPods.
Apple Intelligence Features: Apple released new features for Apple Intelligence, enhancing user experience across devices.
Emerging Markets Growth: Apple saw significant revenue growth in emerging markets, including Latin America, the Middle East, and South Asia.
International Expansion: Apple Intelligence expanded to Australia, Canada, New Zealand, South Africa, and the U.K.
Retail Expansion: New store openings in China, Spain, and the U.S., with plans for a fifth store in the UAE and an online store in Saudi Arabia.
Installed Base: Apple's installed base reached over 2.35 billion active devices, an all-time high.
Gross Margin: Company gross margin was 46.9%, with product gross margin at 39.3% and services gross margin at 75%.
Operating Cash Flow: Operating cash flow was strong at $29.9 billion.
Focus on AI: Apple is investing in AI and enhancing user experiences through Apple Intelligence.
Sustainability Initiatives: The Mac Mini is Apple's first carbon-neutral Mac, reflecting a commitment to sustainability.
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Risk or Challenges
Macroeconomic Conditions: The company acknowledges potential impacts of macroeconomic conditions on business and results, indicating risks related to economic fluctuations.
Foreign Exchange Headwinds: A strong dollar is expected to negatively impact revenue by approximately 2.5 percentage points year-over-year due to foreign exchange headwinds.
Competitive Pressures in China: Apple faces significant competitive pressures in China, with a noted 11% year-over-year revenue decline attributed to changes in channel inventory and competition from domestic brands.
Regulatory Challenges: The company is navigating challenging regulatory burdens globally, which could impact top-line growth and margins.
Supply Chain Challenges: The company is actively managing supply chain planning, particularly in emerging markets like India, to support growth expectations and diversification.
Product Pricing Sensitivity: There is ongoing consideration of pricing strategies in response to market conditions, which may affect consumer demand and market share.
Device Lifecycle and Upgrade Cycles: The average useful life of devices is a factor in future upgrade opportunities, especially following strong sales during the COVID period.
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Guidance & Outlook
Apple Intelligence Expansion: Apple Intelligence features were rolled out in the U.S. and expanded to Australia, Canada, New Zealand, South Africa, and the U.K. in December. Further language expansions are planned for April.
Retail Expansion: Plans to open new stores in China, Spain, and the U.S., with a fifth store in the UAE and an online store in Saudi Arabia expected to launch in summer 2025.
Emerging Markets Growth: Significant growth in emerging markets, particularly in India, where Apple set a December quarter record and plans to open four new stores.
Health Innovations: Continued focus on health innovations with new features in Apple Watch and AirPods, enhancing user engagement and satisfaction.
Revenue Guidance: Expect total company revenue to grow low to mid-single-digits year-over-year for the March quarter.
Services Revenue Growth: Services revenue is expected to grow low-double-digits year-over-year.
Gross Margin Guidance: Guidance for gross margin is between 46.5% and 47.5%.
Operating Expenses Guidance: Operating expenses are expected to be between $15.1 billion and $15.3 billion.
Tax Rate Guidance: Tax rate is expected to be around 16%.
Dividend Declaration: A cash dividend of $0.25 per share is declared, payable on February 13, 2025.
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Shareholder Return Plan
Cash Dividend: The Board of Directors declared a cash dividend of $0.25 per share of common stock, payable on February 13, 2025, to shareholders of record as of February 10, 2025.
Share Repurchase: During the quarter, Apple returned over $30 billion to shareholders, which included $23.3 billion through open market repurchases of 100 million Apple shares.
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Key Q&A
Q:Can you share any details on how Apple Intelligence is impacting iPhone demand and what features users are using most often?
A:We saw that in markets where Apple Intelligence was rolled out, the year-over-year performance on the iPhone 16 family was stronger than those where it was not available. Users are utilizing features like writing tools, image playground, Genmoji, visual intelligence, and cleanup.
Q:What headwinds does Apple face in China regarding iPhone sales?
A:Our greater China revenue was down 11% year-over-year, with over half of the decline driven by changes in channel inventory. Apple Intelligence has not been rolled out in China, and the market is highly competitive.
Q:Can you provide your perspective on the DeepSeek situation and its impact on margins?
A:Innovation that drives efficiency is beneficial. Our integration of silicon and software will continue to serve us well, and we maintain a prudent approach to capital expenditures.
Q:What is the outlook for iPhone innovation in the future?
A:I believe there is a lot more to come, and I am optimistic about our product pipeline.
Q:What is driving the record number of iPhone upgraders?
A:We set an all-time record for upgraders, with compelling reasons to upgrade, especially in markets where Apple Intelligence was launched.
Q:What is the sustainability of growth in emerging markets?
A:We have seen great results in emerging markets, particularly in India, which set a December quarter record. We have modest market share in these regions, indicating significant upside.
Q:What are the expectations for gross margins in the March quarter?
A:We expect gross margin to be between 46.5% and 47.5%, with some FX headwinds impacting revenue growth.
Q:What is the status of channel inventory across product lines?
A:We are comfortable with our channel inventory position globally, but in China, we saw a reduction in inventory due to higher-than-expected sales.
Q:What is the potential impact of tariffs on consumer demand?
A:We are monitoring the situation but have no further comments at this time.
Q:What is the average useful life of devices and how does it impact refresh opportunities?
A:The average useful life varies by user type, with many units sold during the COVID period presenting a significant opportunity for upgrades.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the potential tariff impact on consumer demand under Trump 2.0, stating they are monitoring the situation without further comments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Apple Intelligence
CEO Cook
Cook CFO
Cook Hi
Cook iPhone
Hi market
Intelligence iPhone
Intelligence market
Intelligence term
UK language
base launch
cleanup people
comment tool
country week
end reason
family Apple
feature people
iPhone record
indication moment
intelligence cleanup
language country
launch quarter
level upgraders
market Apple
market lot
moment Cook
one opening
opening comment
people one
people store
playground intelligence
quarter end
reason market
release UK
remark Cook
store week
term feature
upgraders base
upgraders level
week indication
AAPL Transcript
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The earnings call summary reveals strong financial performance, with record EPS and revenue growth across most segments, despite some challenges in wearables. Positive guidance for revenue and services growth, coupled with a dividend increase and significant shareholder returns, further supports a positive outlook. The Q&A section highlights some uncertainties, particularly around tariffs and production mix, but these are not substantial enough to overshadow the overall positive sentiment. The combination of strong earnings, optimistic guidance, and shareholder-friendly moves suggests a positive stock price movement in the short term.
Apple Inc. (AAPL) Q1 2025 Earnings Call Transcript
Positive1-30
The earnings call reflects strong financial performance with record revenues and EPS growth. Shareholder returns are robust, with substantial share repurchases and dividends. Despite challenges in China, the overall market strategy and product innovation, including Apple Intelligence, are positive. The Q&A reveals optimism about future innovation and growth in emerging markets. Gross margin guidance remains strong, and the company is managing inventory well. The positive outlook and financial health suggest a positive stock price movement, although some caution is warranted due to geopolitical risks and competitive pressures in China.
AAPL Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
