Apple's Earnings Unpacked

Good Morning,

Welcome to another edition of ChartWiz, where we break down financial data into easy-to-digest insights. In today’s edition, we cover Apple's latest earnings, highlighting how their revenue streams vary across different regions and product categories, giving insight into what’s driving growth and which areas might need a closer look.

And with that, welcome to ChartWiz!

RECENT EARNINGS BREAKDOWN

Key Highlights for their September, 2024 Quarter

• Digital content services include the App Store, Apple Arcade, Apple Fitness+, Apple Music, Apple News+, and Apple TV+.

• Payment services include Apple Card and Apple Pay.

• Company's segments are managed primarily on a geographic basis: Americas, Europe, Greater China, Japan, and Rest of Asia Pacific.

• In 2024, 38% of net sales were through direct distribution channels and 62% through indirect distribution channels.

• The markets for Apple's products and services are highly competitive with aggressive pricing strategies by competitors.

• The Company has historically experienced higher net sales in its (fiscal) first quarter compared to other quarters due to seasonal holiday demand.

• The Company faces substantial competition from companies with significant technical, marketing, distribution resources, and established hardware, software, and service offerings.

• The Company benefits from growth in international trade, with manufacturing mainly outsourced to partners in China, India, Japan, South Korea, Taiwan, and Vietnam.

• Political tensions, such as those between the U.S. and China, have previously led to tariffs affecting the Company's operations.

• Frequent product introductions and innovations are key to the Company’s competitive strategy.

• The Company holds numerous patents, trademarks, and copyrights, but faces competition from companies imitating its products and infringing on its intellectual property.

• The Company relies heavily on outsourcing partners, which presents risks related to quality control, supply disruptions, and production costs.

• The Company is affected by global semiconductor shortages, significantly impacting component availability and pricing.

• The Company focuses on innovative new technologies and services to maintain a competitive advantage amidst aggressive competition.

• The Company's products and services may be affected from time to time by design and manufacturing defects.

• The Company's future performance depends on the support from third-party software developers.

• There is intense competition in Silicon Valley for talented and skilled personnel.

• Losses or unauthorized access to confidential information could subject the Company to significant consequences.

• The Company invests in new business strategies and acquisitions, which could potentially disrupt ongoing operations and exposes the Company to new risks.

• Various legal proceedings and government investigations could adversely impact the Company’s business, financial condition, and operations.

• The company continues to engage in share repurchase programs, utilizing $20.9 billion of the authorized $110 billion.

• The DOJ and various state and district attorneys have filed antitrust lawsuits against the company related to smartphone markets.

• The company is undergoing investigations under the Digital Markets Act by the European Commission.

• Apple Inc.'s stock performance showed a significant increase in September 2024, achieving $430 compared to $322 in September 2023, showcasing strong shareholder return.

• Europe saw a 7% increase in net sales in 2024, driven by higher sales of Services and iPhone products.

• Greater China's net sales decreased by 8% in 2024, affected by lower iPhone and iPad sales and unfavorable currency exchange rates.

• iPhone net sales were relatively flat during 2024 compared to 2023.

• Mac net sales increased during 2024 compared to 2023 due primarily to higher net sales of laptops.

• Wearables, Home and Accessories net sales decreased during 2024 compared to 2023 due to lower net sales of Wearables and Accessories.

• Services net sales increased during 2024 compared to 2023 due to higher net sales from advertising, the App Store and cloud services.

• The company has repurchased $95.0 billion of its common stock in 2024.

• The company has announced a share repurchase program of up to $110 billion.

• Total net sales for 2024 were $391,035 million, representing a disaggregation by product and service categories.

• iPhone revenue in Greater China represented a moderately higher proportion of net sales compared to other regions.

• The Company uses derivative instruments to protect against foreign currency and interest rate fluctuations.

• Depreciation expense on property, plant, and equipment was $8.2 billion in 2024.

• The Company recorded a one-time income tax charge of $10.2 billion in the fourth quarter of 2024 due to the European Commission's State Aid Decision.

• The effective tax rate was 24.1% in 2024.

• As of September 28, 2024, the Company had $5.1 billion in foreign tax credit carryforwards in Ireland and $3.6 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely.

• The total amount of gross unrecognized tax benefits was $22.0 billion as of September 28, 2024.

• As of September 28, 2024, Apple Inc. had $22 billion in gross unrecognized tax benefits, with $10.8 billion potentially impacting the effective tax rate.

HISTORICAL REVENUE - BY REGION

The 'Revenue By Region' category reveals a symphony of fiscal shifts across the Americas, Greater China, Rest Of Asia Pacific, Europe, and Japan.

• From 2016 to 2024, the Americas flexed its economic muscle with steady growth, peaking in Q4 2020 and Q4 2023 with significant revenues.

• Greater China sang an operatic tale of ups and downs, crescendoing in Q4 2021 before a decline, but remains a vital market.

• In contrast, Rest Of Asia Pacific and Japan delivered more subdued performances, seeing periodic spikes around the end of Q4 each year.

• Europe, ever the dark horse, showcased a steady climb with a notable surge in Q4 2021 and again by Q4 2023.

The dataset indicates not only a geographical diversification of revenue streams but also highlights the potential seasonal dependency in revenue generation, especially during Q4 peaks. For the company, these insights call for strategic reinforcement in booming markets while investigating others for further growth or stabilization opportunities. Balance is key; hence maintaining this harmony across regions might just be the company's ticket to financial virtuosity.

Here’s a look at the most recent quarter revenue by region breakdown.

HISTORICAL REVENUE - BY PRODUCT

The 'Revenue By Product' dataset reveals intriguing dynamics that could make any finance aficionado quiver with curiosity.

• Over time, the iPhone revenue exhibits a cyclical pattern with peaks typically in Q4, noticeable with record highs approaching $70 billion by the end of 2023.

• Meanwhile, the Services sector has seen consistent growth, suggesting a shift towards a more service-oriented revenue model.

• Notably, Mac and iPad revenues experienced irregular surges around 2020, likely pandemic-induced, but face a stabilizing or even declining trend post-pandemic.

• Wearables and Accessories steadily climbed with occasional leaps, showing strong consumer interest.

The data indicates that the company's strategy to diversify its product offerings while bolstering its services portfolio is paving the way for sustained growth. However, one would advise monitoring the dependence on iPhone sales, as diversification remains crucial for long-term resilience.

Here’s a breakdown of how revenue is segmented by each channel.

WORD FROM WIZ

That’s all we have for you in today’s edition of ChartWiz. If you found this valuable, please consider forwarding it to a friend.

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Have a fantastic week!

-Wiz

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