Apple Inc. released its Q4 2024 earnings report today, showcasing a revenue milestone of $94.9 billion, setting a new September quarter record with a 6% year-over-year growth, surpassing Wall Street expectations.
“We’re thrilled to announce our best products yet, with the iPhone 16, Apple Watch Series 10, and AirPods 4,” Cook said. “Our initial Apple Intelligence release sets a new privacy standard in AI, which is essential as we head into the holiday season.”
Shares of Apple, however, dropped about 2% after the announcement, largely attributed to a one-time charge related to back taxes in Ireland.
Apple’s earnings per share (EPS) for the quarter was $0.97, factoring in a $10.2 billion charge related to a European General Court ruling that ordered Apple to pay €13 billion in back taxes to Ireland. Without this charge, EPS would have soared to $1.64, handily beating Wall Street’s expectations of $1.59. Last year’s EPS for the same quarter was $1.46.
Apple’s Q4 earnings offer valuable insights into how tech giants are navigating the next frontier of AI integration and where the industry might be heading. Several key trends and strategies from Apple’s recent quarter could shape the future of technology and AI in both the consumer and enterprise landscapes:
Revenue shift from hardware to services and AI-powered experiences: Apple’s Q4 report highlights nearly $25 billion in Services revenue, pointing to a shift from hardware to digital and AI-powered services like Apple Intelligence.
This growth in subscription services reflects consumers’ rising comfort with AI solutions for convenience and personalization.
The trend signals a broader industry move toward value through software-driven experiences over traditional hardware.
A Push for Device Upgrades through Exclusive AI Features: Apple Intelligence is limited to the newest devices (iPhone 15 Pro, iPhone 16 series), creating a powerful incentive for consumers to upgrade.
This strategy, known as a “supercycle,” mirrors Apple’s iPhone 6 upgrade surge in 2014, which saw record-breaking sales.
This approach of tethering advanced AI features to the latest hardware underlines a larger trend in tech: exclusive, AI-powered functionality is becoming a critical driver of product refresh cycles.
As AI matures, users may expect increasingly sophisticated features that justify new device purchases, further fueling hardware sales.
Apple commands a strong presence in the UK with over 38 stores and a leading position in the smartphone and tablet markets, as iOS held nearly 50% of the mobile and tablet OS market share in 2023.
While Apple remains second in the PC segment, with Windows taking over 67% of market share, it has successfully expanded its product ecosystem to include iPhones, iPads, Macs, and popular accessories like Apple Watch, AirPods, and HomePod.
The UK smartphone market, primarily led by Apple and Android, is projected to reach over 60 million users by 2025, with high customer satisfaction and steady upgrades as new models continue to launch.
A closer look at the numbers
The quarter saw particularly strong iPhone sales, reaching $46.2 billion and exceeding analyst predictions of $45 billion. This boost underscores the successful launch of Apple’s new iPhone 16 lineup, which has received positive reception worldwide, particularly in China.
Notably, in the three weeks following the iPhone 16’s launch, sales in China surged by 20% compared to the same period last year, per data from Counterpoint Research. Apple’s foothold in the Chinese market is crucial, especially as competition with local smartphone brands like Xiaomi and Huawei intensifies.
Apple’s other products had a more mixed performance. The Mac category brought in $7.74 billion, slightly below expectations of $7.82 billion. iPad sales reached $6.9 billion, close to analyst estimates of $7 billion, while revenue from wearables, home, and accessories hit $9 billion, also below expectations.
Greater China, traditionally one of Apple’s strongest markets, saw revenue of $15 billion, falling short of Wall Street’s anticipated $15.8 billion.
Apple’s Services business, which includes revenue from the App Store, iCloud, and Apple Music, brought in $24.9 billion—just under the $25.2 billion forecast.
Services remain Apple’s second-largest revenue category, a sign of the growing reliance on digital subscriptions and services in the tech industry.
The role of apple intelligence in iPhone sales
A critical factor that may be driving iPhone 16 sales is the new “Apple Intelligence” platform. The platform, currently limited to the U.S. in English, is expected to expand with more languages and regional customizations in the coming months.
While the initial capabilities of Apple Intelligence are relatively modest, featuring notification summaries and customization options, the company has ambitious plans for the platform.
Apple CFO Luca Maestri hinted that upcoming updates would include ChatGPT integration and the debut of Apple’s “Visual Intelligence” suite, which could further accelerate device sales.
Apple Intelligence is compatible only with the latest models—iPhone 15 Pro, iPhone 15 Pro Max, iPhone 16, and iPhone 16 Pro—meaning customers with older phones will need to upgrade to access this platform.
The company’s goal is to encourage a “supercycle” of upgrades that could potentially mirror the iPhone 6 supercycle in 2014, which saw record-breaking sales.
Market dynamics: Apple’s relationship with china and its expansion into India
Apple’s strong performance in China this quarter comes after a turbulent year. In 2023, Chinese government agencies restricted employees from using iPhones at work, creating setbacks for Apple.
However, recent sales figures suggest Apple has regained traction, which experts attribute to both improved relations with local government and Apple’s deep integration with Chinese supply chains.
Doug Guthrie, a professor of global management and a former Apple advisor in China quoted by SAN, points out that Apple relies on 1,600 Chinese factories, making a rapid shift in production unlikely.
Nevertheless, Apple is increasingly expanding production into India. Over the past six months, Apple exported $6 billion in iPhones from India—a 33% increase from the previous year.
Guthrie notes that while India shows promise, replicating China’s infrastructure could take decades. Still, the Indian government has supported Apple’s expansion, and the recently settled border dispute between China and India may signal further collaboration between the two countries.
Key challenges and future projections
Looking forward, Apple faces the dual challenge of maintaining market dominance in an evolving tech landscape and continuing to grow sales in emerging markets.
In the UK, Apple’s iOS commands a 44% market share, though overall smartphone penetration is projected to grow to over 60 million users by 2025.
Competition from Android brands is expected to persist, with consumers less likely to upgrade frequently given the high price tags of premium models like the iPhone 16, priced at £799 in the UK.
While Apple’s reliance on China remains strong, its diversification efforts in India reflect a cautious strategy to mitigate supply chain risks.
According to Tim Cook, Apple remains committed to innovation that prioritizes user privacy, as seen with the rollout of Apple Intelligence.
As the platform matures, analysts believe it could become a key differentiator, setting Apple apart from competitors by offering a secure and personalized user experience.
As Apple prepares for the holiday season, analysts expect continued interest in the iPhone 16 and other products powered by Apple Intelligence.
For investors and customers alike, the company’s next major update in AI integration could reveal Apple’s long-term vision for its ecosystem and solidify its place as a leader in both hardware and services.
Apple’s strategic maneuvering in China and India will also be worth watching as the company navigates complex international landscapes in pursuit of sustained growth.