Apple (AAPL) Stock: Earnings Beat as China Demand Surges 38%

TLDR

• Apple reported fiscal first-quarter revenue of $143.8 billion, beating analyst estimates by over $5 billion with 16% year-over-year growth
• iPhone revenue jumped 23% to $85.27 billion, driven by strong iPhone 17 demand that CEO Tim Cook called “staggering”
• Greater China sales surged 38% to $25.53 billion, crushing expectations as iPhone 17 drove record upgrades and Android switchers
• Apple forecasts March quarter revenue growth of 13-16%, above analyst expectations, despite processor and memory chip supply constraints
• Wearables segment missed expectations at $11.49 billion due to unexpected demand for AirPods Pro 3 translation feature

Apple crushed Wall Street expectations in its fiscal first quarter. The company reported revenue of $143.8 billion, up 16% from last year.

That beat analyst estimates of $138.48 billion by over $5 billion. Earnings per share came in at $2.84, ahead of the $2.67 consensus.

CEO Tim Cook had strong words for iPhone performance. “The demand for iPhone was simply staggering,” he told Reuters.

Apple Inc., AAPL

iPhone revenue hit $85.27 billion, smashing estimates of $78.65 billion. That’s a 23% jump from the same period last year.

The iPhone 17 lineup drove the results. Apple set sales records in every geographic region during the quarter.

Cook told CNBC the company gained market share over Android devices during the holiday period. “We set an all-time record for upgraders in mainland China, and we saw double-digit growth on switchers,” he said.

Apple now has an installed base of 2.5 billion devices. That’s up from 2.35 billion reported last January.

China Rebound Crushes Expectations

Greater China delivered the biggest surprise of the quarter. Sales jumped 38% to $25.53 billion.

Analysts had expected just $21.32 billion. The region includes mainland China, Taiwan, and Hong Kong.

The iPhone 17 drove the surge. Double-digit growth in Android switchers helped fuel the numbers.

Apple has faced pressure in China from local competitors and regulatory scrutiny. The strong quarter suggests those headwinds may be easing.

Supply Constraints Loom Over March Quarter

Apple forecast March quarter revenue growth of 13% to 16%. That translates to $107.8 billion to $110.66 billion.

Analyst estimates had called for $104.84 billion. The forecast came with a caveat about supply issues.

The constraints affect both processors and memory chips. Taiwan’s TSMC makes Apple’s chips and is facing capacity issues.

Cook pointed to less flexibility in the supply chain than normal. Rising demand for the iPhone 17 is partly to blame.

Memory chip pricing poses another challenge. A global shortage has hit the consumer electronics industry.

The situation stems from production shifting toward artificial intelligence applications. Data center memory commands higher margins than smartphone memory.

Samsung Electronics and SK Hynix control two-thirds of the DRAM chip market. Both companies warned that smartphone makers would bear the brunt of the shortage.

Mixed Results Across Product Lines

Mac revenue came in at $8.39 billion, missing estimates of $8.95 billion. Sales fell 7% from last year.

The company released an updated MacBook Pro with the M4 chip in November. Cook noted that half of iPad buyers during the quarter were new to the product.

iPad revenue hit $8.60 billion, beating expectations of $8.13 billion. That’s a 6% increase from the prior year.

Wearables, Home and Accessories revenue missed targets. The segment brought in $11.49 billion versus estimates of $12.04 billion.

Apple released AirPods Pro 3 last year with language translation features. Cook said demand for the new product caught the company off guard.

Services revenue reached $30.01 billion, just shy of the $30.07 billion estimate. The business grew 14% from last year.

Apple TV viewership rose 36% in December from a year earlier. The company expects Services to maintain similar growth rates in the current quarter.

Earlier in January, Apple announced a partnership with Google to use Gemini for an improved Siri. On Thursday, the company acquired Q.ai, an AI startup focused on detecting speech, moods, and heart rates from facial expressions, for $1.6 billion.

Apple spent nearly $32 billion on share repurchases and dividends during the quarter. The company reported $42.1 billion in net income.

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