Apple announced financial results for the third fiscal quarter of 2024, which corresponds to the second calendar quarter of the year. Based on the information provided in Apple's earnings call for this quarter, it was as follows.
Achieving record profits with strong growth in the services sector
Apple achieved record revenues of $85.8 billion, a significant increase of 5% over revenues for the same period of the previous year, which amounted to $81.8 billion. These results exceeded the company's own expectations, indicating Apple's strong performance in the global market despite the economic challenges.
This growth in revenue was reflected in the company's quarterly net profit, which rose from $19.9 billion last year to $21.4 billion this year.
This improvement in financial performance was also reflected in earnings per share, as earnings per diluted share rose from $1.26 in the third quarter of 2023 to $1.40 in the current quarter.
These numbers indicate continued strong growth with improvements in both revenues and profitability compared to the previous year.
Apple achieved a noticeable improvement in its gross profit margin for the third quarter of 2024, reaching 46.3%, compared to 44.5% in the same period of the previous year. This indicates an increase in the company's efficiency and its ability to achieve higher profits from its sales.
In addition, Apple announced a quarterly dividend to shareholders of $0.25 per share. These dividends will be paid on August 15 to shareholders registered in the company’s records until August 12. This announcement confirms Apple's commitment to rewarding its shareholders and reflects its confidence in its continued financial performance.
“We achieved record third-quarter revenue, with strong growth in many global markets,” Apple CEO Tim Cook said. He added that the company recorded record revenues in more than twenty countries and regions, including Canada, Mexico, France, Germany, the United Kingdom, India, Indonesia, the Philippines and Thailand.
Record growth in the services sector
One of Apple's most notable achievements this quarter was the strong performance of its services segment, which generated record revenues of $24.2 billion, an increase of 14% from the previous year. This growth was contributed to by the increase in the number of paid subscribers, which reached a new record level. Apple also set records in advertising, cloud computing and payments services.
Luca Maestri, Apple's chief financial officer, commented on this growth, saying: “Growth in the active device base sets a strong foundation for future expansion of our ecosystem.” He added that the number of paid and active accounts continues to grow at strong rates, with more than one billion paid subscriptions across Apple platforms, which represents double the number four years ago.
Mixed performance across product segments
On the product front, Apple witnessed varying performance across its different categories:
IPhone
It achieved revenues of $39.3 billion, a slight decrease of 1% from the previous year. However, Cook noted that iPhone sales grew in constant currency compared to 2023. This means that if currency exchange rates had not changed between 2023 and 2024, iPhone sales would have recorded positive growth.
The aim of this measurement is to give a clearer picture of the actual performance of the product in different markets, regardless of changes in the value of local currencies against the US dollar. For example, iPhone sales may have increased in some international markets in local currency, but when converted to the US dollar, they appeared to have decreased due to the strength of the dollar against those currencies.
So, referring to growth in “constant currency” is an attempt by Apple to explain that demand for the iPhone remains strong, and that the apparent decline in US dollar revenue is due in part to factors beyond the company’s control, such as exchange rate fluctuations.
Mac device
Revenue rose 2% to $7 billion, with the active Mac device base reaching a new record high.
IPad
It saw strong growth of 20% to $7.2 billion, driven by the launch of the new iPad Air and iPad Pro.
Wearables, home and accessories
Revenue fell 2% to $8.1 billion.
Focus on artificial intelligence and innovation
Tim Cook stressed Apple's commitment to innovation and advanced technology, noting the launch of “Apple Intelligence“, which is a set of artificial intelligence technologies integrated into Apple’s systems. “We are very excited about Apple’s intelligence, and we remain very optimistic about the extraordinary potential of artificial intelligence and its ability to enrich customers’ lives,” he said.
Cook also noted the huge interest in Apple's Vision Pro, with 2,500 native spatial apps and new immersive content coming to it. He also stressed the great interest in this technology in the business sector, as it can enable large and small companies to pursue their best ideas in unprecedented ways.
Future outlook and challenges
Despite the strong results, Apple cited an ongoing challenge with the impact of foreign exchange rate fluctuations on profit margins due to fluctuations in global currency rates. This challenge affects the company's profitability in different ways:
◉ Impact on revenue: When the US dollar is strong against other currencies, sales made in foreign currencies translate into lower US dollar amounts when converted. This can reduce total revenues reported in US dollars.
◉ Impact on costs: If Apple produces or purchases components in other countries, its costs may increase if the dollar becomes weaker against those countries' currencies.
◉ Impact on profit margins: Margin is the difference between the selling price and the cost of production. If revenues or costs are adversely affected by exchange rate fluctuations, this could reduce profit margins.
◉ Pricing challenges: Apple may find it difficult to adjust the prices of its products in international markets in response to currency fluctuations, which could affect its competitiveness or profitability.
In Apple's case, Luca Maestri, the company's chief financial officer, stated that the impact of foreign exchange rates will continue to be a negative factor, affecting about 1.5 percentage points year over year in the next quarter.
This means that Apple expects currency fluctuations to negatively impact its growth and profit margins by 1.5% compared to the previous year. This is an ongoing challenge that the company tries to manage through various strategies, such as financial hedging, but it remains a factor outside its direct control.
As for Apple’s strategy in the field of artificial intelligence, Tim Cook revealed the company’s plan to gradually launch “Apple Intelligence” features. The company has already started rolling out some of these features this week, with a promise to add more functionality and languages and expand regional coverage over the next year. In a remarkable step, Cook announced that Apple is working to integrate ChatGPT technology into its services, expecting this integration to be completed by the end of this year.
Conclusion
Apple's results for the third quarter of 2024 show the company's ability to maintain its growth and profitability in a volatile economic environment. With an increasing focus on the services sector and investment in artificial intelligence technologies, Apple appears well positioned to continue its growth in the future. However, Apple will still need to confront ongoing challenges, including intense global competition and exchange rate fluctuations, while maintaining the pace of innovation it has been known for over the years.
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