Apple’s ‘Great’ Could Be Better

Apple on Thursday reported what it was probably fair to call mixed results for a holiday quarter clouded by concerns around the company’s foothold in China and a less-than-impressive opening push into AI.

Revenue was $124.3 billion for the period, ahead of estimates, but not by enough to impress anyone.

Sales growth versus the 2023 holiday season was 4%. It was the third straight period during which Tim Cook grew the top-line. Recall that Apple saw sales fall for five of six quarters across 2022 and 2023.

I’d be lying if I said the trajectory, illustrated above, is impressive. It’s not. But it’s hard to log blockbuster growth as a consumer products company when you’ve achieved the kind of penetration Apple has, particularly when you don’t release any truly new products.

That latter point strikes at the heart of what, in my opinion anyway, is “wrong” at Apple, with the scare quotes to acknowledge that when you’re the best company on Earth (as Apple arguably still is), “wrong” is a bit of a misnomer: Innovation’s lacking. The goggles look like they’re going to be a bust, and although I realize a lot of people like the watch, it’s hardly the iPhone.

Speaking of iPhones, sales of $69.14 billion in the fourth quarter (fiscal Q1) counted as a miss. The Street wanted $71 billion. Fortunately, Mac and iPad sales both beat easily ($8.99 billion versus $7.94 billion expected and $8.09 billion versus $7.35 billion seen, respectively) and wearables was basically in line.

Services revenue of $26.34 billion topped consensus, and the installed base hit another record across all products and in every region.

It looked, initially, like Apple managed an upside surprise with Greater China revenue of $18.5 billion. I saw consensus listed at $17.97 billion. Apparently, analysts were actually looking for more than that. Either way, sales fell YoY, underscoring worries that Apple’s market share across the world’s second-largest economy might be at risk of terminal decline amid fierce (and subsidized) local competition.

On the bottom line, EPS of $2.41 was a beat for Apple, and gross margin of $58.28 billion was ahead of the Street.

Technically — and this was Cook’s take — Q4 2024 (again, fiscal Q1) was the best quarter ever for Apple on a variety of key metrics, and as Kevan Parekh remarked, in his first quarterly report as CFO, the company returned $30 billion to shareholders.

The question’s never whether Apple’s doing fine (it’s always doing great), the question’s whether it could be doing even better. My long-standing position is that it could.

4 thoughts on “Apple’s ‘Great’ Could Be Better”

Thanks to my experience in the open source software movement in the late 80s and 90s, I’ve never been a big fan of the company. But I respect how they focussed on easy to use and good enough to lure users into their walled garden.

So it may surprise you that I think that Apple was damn right NOT to waste billions developing their own LLM models. Even when the geniuses on Watt Street (who could not tell you just what AI is or how it works) were all screaming that Apple had “missed” AI. DeepSeek and IBM’s experience shows that what Apple “missed” was pouring huge money down the LLM rathole. Well done, Cupertino!

Now use some of they money saved to buy Intel along with Berkshire to secure your chip supply and allow you to truly be a Made in the USA company.

I couldn’t tell what turned the stock around during the call. I guess someone will put the aftermarket chart up against the transcript and figure it out.

Efficient inference could reward AAPL’s architecture of AI compute on-device, commoditized AI models could validate AAPL’s decision to use ChatGPT rather than invest in it, and with enough model efficiency it could be that AAPL has the proprietary AI silicon that others are rushing to develop and at far lower cost than others. That all feels too long-term to matter aftermarket.