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Apple’s Q4 2023 Earnings: Still a Cash Machine
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As the leaves turned amber and the fiscal year drew to a close, Apple Inc. recently presented its Q4 2023 earnings. Tim Cook summarized the quarter in the earnings call, touching on several revenue records, iPhone surprising on the upside, and the continuously challenging macro environment:
“We achieved an all-time revenue record in India as well as September quarter records in several countries, including Brazil, Canada, France, Indonesia, Mexico, the Philippines, Saudi Arabia, Turkey, the UAE, Vietnam and more. iPhone revenue came in ahead of our expectations, setting a September quarter record as well as quarterly records in many markets, including China Mainland, Latin America, the Middle East, South Asia and an all-time record in India. In Services, we set an all-time revenue record with double-digit growth and ahead of our expectations. During the September quarter, we continued to face an uneven macroeconomic environment, including foreign exchange headwinds, and we've navigated these challenges by following the same principles that have always guided us. We've continued to invest in the future and managed for the long term.”
Apple’s Overall Performance
Revenue-wise, Apple saw a fractional decrease of 0.7% in Q4, making it the fourth straight quarter of sales declines. Historical numbers, as it’s in fact the longest slump since 2001.
As for the product lines, the flagship iPhone showed resilience, bucking the trend with a 2.8% sales increase; Mac took a significant 34% hit; iPad a 10% drop; Wearables down 3.4%; and lastly on a brighter note, Services surged by 16%.
“Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem.” CFO Luca Maestri said during the earnings call.
On Geographic variations, the Americas rose by 7.7%; Europe declined 1.5%; Greater China fell by 2.5%; and Japan and Rest of Asia Pacific fell 3.4% and 2.5% respectively.
Despite slower product revenue growth, Apple continues to squeeze higher revenues out of the higher-margin Services segment, producing impressive cash flow and margins for the quarter. Apple’s EBIT rose by 8.3%, with margins rising from 27.6% to 30.1%, and EPS climbing by 14%.
Apple’s Crazy Hypothetical Shopping Spree
With an EBIT, or Operating income of almost $27 billion in the quarter, Apple’s last twelve months (LTM) EBIT amounts to over $112 billion; that’s almost the same amount of EBIT in the last twelve months as the GDP of Kenya in 2022.
In a lighter exploration, let’s imagine what Apple could theoretically buy with it’s LTM EBIT: Maybe Adyen to fortify its position in the payments industry; Warner Brothers Discovery to start competing in the streaming wars; Universal music to own basically half the music industry; Etsy to test their wings in e-commerce on the side; and lastly HelloFresh to provide its top tier subscribers with tailored meal-kits.
Buying all these companies above would, believe it or not, still leave them with additional dry powder equivalent to the combined market caps of Moncler, Burberry, and Zoom. Perfect for covering integration costs, don’t you think?
Concluding thoughts
Joking aside, there’s a lot to learn from the reports and earnings calls of not only these big-tech names, but all companies in general. It’s the little things in the earnings calls and reports that can give you hints about what’s next for companies and the industries in which they operate. So, if you haven’t done your listening or reading, now’s a good time to start.
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