Apple's Q4 2023 Earnings Call Summary | Gross profit margins hits a new high at 45.87%, with iPhone sales reaching historic highs in countries such as the Philippines and Mexico!
Table of Contents
Summary of Apple’s Q4 2023 Financial Report
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Revenue: $119.58 billion, a year-over-year increase of 2.1%.
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Gross profit margin: 45.9%, a year-over-year increase of 2.9%, and a quarterly increase of 0.7%, benefiting from optimized product mix, reaching a new high.
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Operating margin: 33.8%, a year-over-year increase of 3.1%, and a quarterly increase of 3.7%.
- Q4 2023 EPS was $2.18, a year-over-year increase of 15.8%.
Apple’s Q4 2023 Sales Breakdown
iPhone
iPhone has a revenue of $69.7 billion, a year-over-year increase of 6%.
- Multiple emerging markets set sales records, with total revenue reaching an all-time second high, with China being the only region experiencing a 13% year-over-year decline.
Cook stated that in the fourth quarter, “emerging markets have been a very key growth area for Apple,” and mentioned that “many emerging markets have achieved strong double-digit growth, with historic highs in Malaysia, Mexico, the Philippines, Poland, and Turkey, while achieving fourth-quarter highs in India, Indonesia, Saudi Arabia, and Chile.”
• 2.2 billion active smartphones, up 10% from the same period last year when it was 2 billion.
Wearable Devices
Wearable Devices has a revenue of $11.95 billion, down 11.3% year-over-year.
Revenue from Wearables, Home, and Accessories totaled $12 billion, a decrease of 11% compared to the same period last year, due to challenging product launches compared to the prior year period which had an additional week. Last year at this time, we benefited throughout the quarter from the releases of the second-generation AirPods Pro, Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch, with nearly 2/3 of customers purchasing Apple Watch being new to the product. According to the latest report from 451 researches, customer satisfaction in the United States is at 96%.
Mac
Mac has a revenue of $77.8 billion, up 0.6% year-over-year.
• Saw a significant rebound from a 33.8% year-over-year decline in Q3 2023, still down about 25% compared to the pandemic period.
iPad
iPad has revenue of $70.2 billion, down 25.3% year-over-year.
• Significant year-over-year decline in iPad revenue due to the prolonged absence of new product releases.
Services
Services has a revenue of $231.2 billion, up 14% year-over-year.
• Achieved a historic high in revenue, primarily driven by increases in advertising, cloud services, Apple Pay, and the App Store.
• Double-digit growth in subscription numbers.
In terms of services, Apple is highly satisfied with its double-digit growth, which is attributable to the strength of our ecosystem. Our installed base now exceeds 2.2 billion active devices and continues to grow steadily, providing a solid foundation for the future expansion of our services business.
We also continue to see increased customer engagement with our services. Both transaction accounts and paid accounts have reached historic highs, with double-digit year-over-year growth rates for paid accounts.
Additionally, our paid subscriptions demonstrate strong double-digit growth. We now have over 1 billion paid subscriptions across our platforms, more than double the number from just four years ago.
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Key Points from Apple’s Earnings Call
AI Applications
• The company stated that it will introduce exciting AI applications this year, with rumors suggesting it could involve adding more AI features to the voice assistant Siri, possibly alongside the launch of iPhone 16.
Regarding the voice assistant Siri, personally, I usually keep Siri turned off on my iPhone as having it constantly active drains the phone’s battery, causing it to heat up. If I need to ask a question, I find it more reliable to type and ask ChatGPT or Bard directly. Previously, I haven’t had good experiences with verbal queries to Siri.
Vision Pro
• The company announced in a press release that it will be adding over 600 Vision OS Apps, focusing on productivity and entertainment, to create a more comprehensive ecosystem, which is expected to further boost Vision Pro sales.
iPhone Outlook
• Sales in emerging markets set records, with sales in China declining by 13% year-over-year. The Americas region, which contributed the most to revenue, saw a 2.3% year-over-year increase in sales, albeit at a slower pace, but with improvements in average selling prices (ASPs) across all regions.
EU Antitrust Regulation
• The company has made changes to the App Store agreement in the European region, including reducing commissions from 15%-30% to 10%-17%; charging a fee of €0.50 for free apps that have over one million downloads; and allowing the download and installation of apps from third-party stores.
For apps that exceed one million installations annually, a core technology fee of €0.50 will be charged. A core technology fee will be charged for the first installation by the same customer account within 12 months. There will be no additional charge for repeat installations within the same year. Apple estimates that less than 1% of developers will pay the core technology fee, as most apps do not reach the threshold of one million annual installations.
The new fee structure reflects the fact that the Apple App Store will no longer be the only destination for apps for European customers. Developers can choose to accept Apple’s 10% to 17% commission to enter the App Store or distribute their apps elsewhere. However, core technology fees apply if apps exceed the quantity threshold, whether they are sold in the App Store or distributed through third-party markets.
• The EU region accounts for approximately 6% of the App Store, with limited impact, but there are concerns that other regions may follow suit, impacting revenue.
Gross Profit Margin Reaches 45.87%
• The gross profit margin is 45.87%, reaching a historic high, mainly driven by increases in product margins and service revenue, indicative of a long-term trend.
The company’s gross margin is 45.9%, up 70 basis points quarter-over-quarter, primarily driven by leverage and favorable mix, partially offset by foreign exchange.
Product gross margin is 39.4%, up 280 basis points quarter-over-quarter, similarly driven by leverage and mix, partially offset by foreign exchange.
The service gross margin is 72.8%, up 190 basis points quarter-over-quarter, primarily due to a more favorable mix.
Operating expenses were $14.5 billion, in the mid-point of the range provided in our guidance, up 1% year-over-year.
Net income was $33.9 billion, an increase of $3.9 billion from the previous year.
Diluted earnings per share were $2.18, up 16% from the previous year, reaching a historic high. Operating cash flow was very strong, reaching $39.9 billion.
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