Apple (NASDAQ:AAPL) wrapped up its December quarter with a strong earnings report last Thursday, delivering both top- and bottom-line beats even as iPhone sales in China disappointed.
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Fueled by record-breaking revenue in the Americas, Europe, and Asia-Pacific, total revenue climbed 4% year-over-year to an all-time high of $124.3 billion, exceeding Wall Street’s forecast by $270 million. Service revenue reached $26.34 billion, edging past the $26.1 billion consensus estimate, while Mac and iPad sales also outperformed, generating $8.99 billion and $8.09 billion, respectively – both above analyst projections of $7.94 billion and $7.35 billion.
However, iPhone sales in China fell 11% to ~$18 billion, contributing to total iPhone revenue of $69.14 billion – short of the $71.04 billion forecast. Even so, Apple delivered a record EPS of $2.40, topping expectations by $0.06.
On the earnings call, CEO Tim Cook struck an optimistic tone, noting that the iPhone 16 cycle is already outperforming the iPhone 15. The company also saw a record number of iPhone upgrades in the December quarter. Apple closed out FY24 with an active installed base of 2.35 billion devices, reflecting an impressive 7% y/y growth and the addition of approximately 150 million net new devices to its ecosystem over the past year.
That expanding ecosystem is precisely what has Wedbush analyst Daniel Ives excited: “Herein lies the golden installed base that is at the epicenter of our bull thesis and why we believe ~25% of the world will ultimately access AI through an Apple device.”
Apple also provided “important granular data” regarding the impact of Apple Intelligence-driven demand. In markets where Apple Intelligence was already available (such as the U.S.), y/y performance outpaced regions where the AI rollout has yet to take place, which bodes well for the next few quarters.
“With the anticipated April rollout of Apple Intelligence in China (Chinese partner likely Baidu or Tencent), India, and other markets the strength of this iPhone 16 cycle will be more back end loaded in the March and June quarters,” Ives added.
A key takeaway for Ives is that Apple is now at the start of a “multi-year upgrade cycle” from iPhone 16 to iPhone 17 with the Apple bears about to beat a hasty retreat.
“The Nvidia AI Revolution essentially happened overnight….Apple’s AI Consumer Revolution will happen over the course of 12-18 months and with almost 2.4 billion iOS devices including 1.5 billion iPhones this speaks to our firm bullish thesis on Cupertino and Cook & Co. over the next year,” Ives summed up.
Bottom line, Ives rates AAPL shares an Outperform (i.e., Buy) with a Street-high $325 price target. (To watch Ives’ track record, click here)
The broader Wall Street view is more conservative, with an average target of $251.60, pointing to a ~10% upside over the next year. Overall, the stock earns a Moderate Buy consensus, based on 18 Buys, 10 Holds, and 4 Sells. (See AAPL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
