Apple beat revenue and EPS, but Greater China missed at $17.54B and shares traded flat after hours.
Anurag Rana says guidance matters most because no new base iPhone shifts December shipments into March and June, while services growth slows to 10%.
Mark Gurman says December hinges on the scarce $2,000 iPhone Duo, which may push revenue into next year.
Apple beats estimates as December rides on a $2,000 phone
Apple's quarter beat on revenue and earnings, but the beat came from the iPhone 18 Pro, carrier deals and continued iPhone 17 Pro Max demand. There is no regular iPhone 18 and several fall products slipped into the holiday quarter. December guidance rests on a single $2,000 phone whose supply is hard to read, so the forecast matters more than the beat.
Takeaways
Guidance matters more than the earnings beat. Apple beat on revenue at $114.48bn and earnings per share of $2.10, yet the stock traded flat. With no base iPhone update this cycle, shipments shift from December into March and June, making the forecast the bigger number.
China stays the weakest region. Greater China revenue came in at $17.54bn against an $18.75bn estimate, after growth of 28% and 22% in the prior two quarters. Rana says tough comparisons and a saturated US market leave China the key growth driver for three more years.
iPhone Duo demand outruns supply. Rana expects about 15m iPhone Duo units this year, against initial estimates of 10m to 12m. Gurman says nobody can find one, pre-orders stretch to late January, and Apple books no revenue until a customer receives the phone.
Services growth slows as AI search grows. Services revenue of $31.57bn just met the $31.58bn estimate and growth has slowed to around 10%. Gurman says a large chunk of services is Google's search revenue share, which shrinks as users move to AI assistants.
Memory costs pressure gross margins. Rana was surprised Apple beat on the bottom line given expected margin pressure from higher memory costs. His question for management is how Apple holds gross margins over the next three to four quarters and what it does with its supply chain.
Apple's AI story rests on cash. Gurman attributes Apple's 25% run, the best among the Magnificent Seven against Microsoft's 10%, to its cash position while hyperscalers spend theirs. Siri AI runs on Gemini and executes the original Siri vision properly, but it is nowhere close to ChatGPT.
Ternus wants Apple faster and leaner. This was John Ternus's first earnings call as CEO. Gurman says Apple remains a product company, recent initiatives were in the works for half a decade under Tim Cook, and Ternus wants it to run faster with more cost cutting.
Apple's product pipeline
The touchscreen MacBook Pro goes on sale Friday, and the Home View, HomePod Mini, Apple TV and OLED iPad were pushed into the holiday quarter.
Next year Gurman expects a strong cycle for AI wearables, including smart glasses and the delayed AirPods with cameras.
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On this episode 4
Show 1
In 2028 to 2030 he points to robotics and augmented reality glasses as the areas that matter.
Cracked-screen reports on the iPhone Duo have slowed sharply and look like a defect in an early batch.