Last week while I was on vacation, Apple released the results for its 2024 fiscal third quarter (which ran from March 31, 2024, to June 29, 2024) and held a call with analysts to discuss the results. This is typically not a big fiscal quarter for Apple, but Apple made the best of it, announcing its best fiscal third quarter ever, with record revenue of $85.8 billion (up from $81.8 billion this time last year). There was also some interesting news on services, which I discuss below. If you want to get all of the nitty-gritty details, you can listen to the audio from the announcement conference call on the Apple website, or you can read a transcript of the call prepared by Jason Snell of Six Colors. Apple's official press release is here. Here are the items that stood out to me.
iPhone
- Apple's iPhone revenue for the quarter was $39.3 billion, down slightly from $39.7 this time last year.
- Apple CEO Tim Cook noted that if it were not for the fluxation between the dollar and other currencies, iPhone revenue would have grown instead of being down slightly.
- Looking at the big picture across many quarters, iPhone revenue has been fairly steady for the last 2.5 years. That may sound boring, but it is a great thing. The iPhone is a killer product that brings in tons of money for Apple, which means that Apple can spend lots of money making future iPhones even better. Virtually every other company in the world would love to have a business that is as good as Apple's iPhone business.
iPad
- iPad revenue was $7.2 billion, up 24% from $5.79 billion a year ago. That is a huge iPad quarter. Apple has had other quarters in its history with over $7 billion in iPad sales, but it doesn't often happen outside of the first fiscal quarter, which contains holiday sales. (In 2021 Q1, Apple hit $8.4 billion in iPad revenue; in 2023 Q1, Apple hit an all-time record $9.4 billion in iPad revenue.)
- There is no real mystery behind the reason for the iPad revenue jump last quarter. After not releasing any new iPads at all in 2023, Apple released some great ones a few months ago, including the new iPad Pro M4 and the new iPad Air. I'm sure that there were lots of people—like me—who were waiting to upgrade until Apple released a fantastic new iPad. And Apple did that.
Services
- Perhaps the most interesting news was that Apple had its best-ever quarter for services. Services is a broad category that includes everything from the money that people spend at the App Store, subscriptions such as Apple Music, Apple TV+, Apple One, etc., third-party subscriptions for which Apple receives a share, licensing, Apple Care, Apple Pay, and more. On the one hand, you might say that having a record quarter in services revenue is no big surprise because virtually EVERY quarter has been a record quarter for services revenue for many years now. Every quarter, it goes up a little more. On the other hand, that number is now starting to get pretty big: $24.2 billion this quarter. That made it 28% of all of Apple's revenue last quarter: less than the iPhone (46%) but more than all other categories combined (Mac, iPad, Wearables). When you ask someone what Apple does, it makes sense for the #1 answer to be that it sells the iPhone, but I wouldn't have guessed that the #2 answer is providing services.
- Services is a particularly interesting category for Apple. Unlike buying products, which people might do only once every few years, many people pay for the same service month-after-month. That makes it a steady source of income that doesn't fluctuate up and down. Also, it is a great source of profit. Apple has some of the highest profit in the industry on its hardware, around 35%. But in the services category, it is currently seeing 74% profit.
- Jason Snell of Six Colors wrote a fascinating article addressing what it means for Apple to be doing so well in the services category. It definitely changes what Apple is about. Don't get me wrong, products are still important; people spend money on Apple services specifically because they use those services on Apple hardware. You need to have the iPhone and Mac and iPad for services revenue to continue to grow. But as Apple looks to its future, making decisions on services becomes just as important as making decisions on its traditional hardware products. This is something new that Apple has never before seen in its history.
