Apple Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Tim Cook: Highlighted record revenue of $102.5 billion, services revenue record of $28.8 billion, and EPS of $1.85. Mentioned strong market growth in numerous regions, new product launches including the iPhone 17 series, Apple Watch with health features, AirPods Pro 3, M5 chips, Apple Vision Pro, and software updates. Emphasized AI investments and advancements like Workout Buddy and live translation.
• Kevan Parekh: Discussed revenue details, gross margin of 47.2% (above guidance range), operating expenses up 11% due to R&D investment, cash position with $132 billion in cash and marketable securities, and capital return to shareholders. Highlighted enterprise adoption of Apple products and strong services growth surpassing $100 billion for the fiscal year.

Segment Performance

• iPhone: Revenue was $49 billion, up 6% year-over-year, setting a September quarter revenue record with growth in most markets despite supply constraints on some models. It contributed significantly to products revenue.
• Mac: Revenue was $8.7 billion, up 13% year-over-year, driven by the strength of the MacBook Air, with growth in all geographic segments.
• iPad: Revenue was $7 billion, flat year-over-year, with an all-time high installed base and a September quarter record for upgraders.
• Wearables, Home and Accessories: Revenue was $9 billion, flat year-over-year, driven by growth in Watch and AirPods but offset by accessories; both Watch and AirPods installed bases reached new all-time highs.
• Services: Revenue was $28.8 billion, up 15% year-over-year, an all-time record, with double-digit growth in most markets and categories, including all-time records in many services categories.

Guidance

• Expect December quarter revenue to be the best ever, growing 10%-12% year-over-year.
• iPhone revenue to grow double digits year-over-year.
• Services revenue to grow at a similar rate to FY2025.
• Gross margin expected to be between 47% and 48%, including an estimated $1.4 billion tariff-related costs.
• Operating expenses expected to be between $18.1 billion and $18.5 billion.
• OI&E expected to be around $150 million.
• Tax rate expected to be around 17%.
• Board declared a cash dividend of $0.26 per share payable on November 13, 2025.

Risks

• Macro-economic conditions impacting business and operations.
• Tariffs and other measures affecting results.
• Legal and regulatory proceedings posing uncertainties.
• Supply constraints on certain iPhone models affecting sales potential.

Question and Answer

Q: Congrats on the results. Can you share more detail on why iPhone 17 is successful?

A: Tim Cook said it's all about the product, with the strongest iPhone lineup ever, including the powerful 17 Pro, thin and light iPhone Air, and value-packed iPhone 17.

Q: Can you discuss managing component cost inflation?

A: Kevan Parekh said the procurement team finds cost opportunities, with memory and storage prices having a slight tailwind, and gross margin above guidance range.

Q: Talk about iPhone in China specifically. How is it trending?

A: Tim Cook said store traffic is up significantly, and they expect to return to growth in Q4 due to reception of the iPhone 17 family.

Q: Services revenue growth is strong. Any drivers?

A: Kevan Parekh said it's organically driven with broad-based growth across categories and regions, surpassing $100 billion for the fiscal year.

Q: Can you walk through gross margin expectations for December quarter?

A: Kevan Parekh said it's targeted at 47%-48%, driven by favorable mix despite new products having higher cost structure initially.

Q: What about supply constraints in iPhone?

A: Tim Cook said they are constrained on several 17 models, working hard to fulfill orders but not predicting when supply/demand will balance.

Q: Role of smartphone subsidies in China?

A: Tim Cook said subsidies play a favorable role, driving consumer demand though only apply to certain price ranges.

Q: On iPhone 17 demand and mix?

A: Tim Cook said it's too early to call mix, but demand is very strong with back orders after Q4.

Q: Thoughts on AI impact on App Store?

A: Tim Cook said there are opportunities on the App Store with AI, as developers are adopting on-device models.

Q: Personalized Siri progress?

A: Tim Cook said they're making good progress, expect to release next year, and are open to M&A for AI advancements.

Q: Apple's hybrid approach to data centers?

A: Kevan Parekh said they continue to leverage hybrid model with first-party and third-party capacity, investing in private cloud compute.