Apple's Q3 2024: record revenue, AI focus, and services growth

On August 1, 2024, just two days ago, Apple announced its financial results for the third fiscal quarter of 2024, which ended on June 29, 2024. The technology giant reported a record June quarter revenue of $85.8 billion, marking a 5% increase year-over-year. This financial performance, coupled with significant announcements in artificial intelligence and continued growth in services, paints a picture of a company navigating changing market dynamics while focusing on innovation.

According to the earnings report, Apple's quarterly earnings per diluted share reached $1.40, representing an 11% increase compared to the same period last year. This growth in earnings per share outpaced revenue growth, indicating improved profitability. The company's CFO, Luca Maestri, highlighted that this performance generated nearly $29 billion in operating cash flow, allowing Apple to return over $32 billion to shareholders during the quarter.

One of the most notable aspects of Apple's Q3 results was the performance of its services segment. Services revenue reached an all-time high of $24.2 billion, growing 14% year-over-year. This growth in services, which includes offerings like Apple Music, Apple TV+, iCloud, and the App Store, underscores the company's successful efforts to diversify its revenue streams beyond hardware sales.

Tim Cook, Apple's CEO, emphasized the company's focus on artificial intelligence during the earnings call. He introduced Apple Intelligence, described as a breakthrough personal intelligence system that integrates powerful, private generative AI models into iPhone, iPad, and Mac devices. This announcement comes at a time when AI has become a central focus in the tech industry, with companies racing to incorporate advanced AI capabilities into their products and services.

The introduction of Apple Intelligence represents a significant step in Apple's AI strategy. Cook stressed that this system builds on years of innovation and investment in AI and machine learning. It aims to transform how users interact with technology, offering features such as advanced writing tools, image creation capabilities, and improved notification management. Importantly, Cook emphasized that Apple Intelligence is built on a foundation of privacy, utilizing on-device processing and a new approach called "private cloud compute" to protect user information.

In terms of product performance, iPhone revenue stood at $39.3 billion, showing a slight 1% decrease year-over-year. However, Apple noted that iPhone sales grew in constant currency terms. The Mac segment saw a 2% increase in revenue, reaching $7 billion, while iPad revenue jumped 24% to $7.2 billion, driven by new product launches. The wearables, home, and accessories category experienced a 2% decline, bringing in $8.1 billion.

Geographically, Apple reported June quarter revenue records in several countries and regions, including Canada, Mexico, France, Germany, the UK, India, Indonesia, the Philippines, and Thailand. This diverse growth across markets demonstrates the company's global appeal and its ability to penetrate both developed and emerging markets.

The company's financial position remains strong, with $153 billion in cash and marketable securities at the end of the quarter. Apple's net cash position stood at $52 billion after accounting for $101 billion in debt. During the quarter, Apple returned over $32 billion to shareholders through dividends and share repurchases, underlining its commitment to capital return.

Looking ahead, Apple provided some guidance for the September quarter. The company expects total revenue to grow year-over-year at a rate similar to the June quarter, with services revenue continuing to grow double digits. Apple anticipates a gross margin between 45.5% and 46.5%, reflecting the company's ability to maintain high profitability despite challenging global economic conditions.

The focus on AI and the strong performance in services come at a time when the smartphone market has matured, and companies are seeking new avenues for growth. Apple's emphasis on AI integration across its ecosystem suggests a strategic shift towards leveraging its vast installed base of devices to deliver more personalized and intelligent experiences.

However, challenges remain. The slight decline in iPhone revenue, even if offset by currency effects, highlights the competitive nature of the smartphone market. Additionally, Apple faces ongoing scrutiny regarding its App Store practices, particularly in regions like the European Union where regulatory pressures are increasing.

Apple's Q3 2024 results reflect a company in transition, balancing its traditional hardware business with growing services and a push into advanced AI technologies. The coming months will be crucial as Apple prepares to launch new products and services, particularly those incorporating the newly announced AI capabilities.

Key facts from Apple's Q3 2024 earnings report

Revenue: $85.8 billion, up 5% year-over-year

Earnings per diluted share: $1.40, up 11% year-over-year

Services revenue: $24.2 billion, an all-time high with 14% growth

iPhone revenue: $39.3 billion, down 1% but grew in constant currency

Mac revenue: $7 billion, up 2%

iPad revenue: $7.2 billion, up 24%

Wearables, home, and accessories revenue: $8.1 billion, down 2%

Cash and marketable securities: $153 billion

Quarterly dividend declared: $0.25 per share

Introduction of Apple Intelligence, a new AI-driven system for Apple devices