Fourth quarter results beat Wall Street expectations, as overall sales rise 6 percent, but EU tax ruling hits profits
Apple has delivered a strong set of fourth quarter and year-end results, but the hugely profitable tech giant was impacted by a recent European tax ruling against it.
In its Q4 and FY24 year-end results, Apple’s profits took a rare hit while both quarterly and annual revenues recorded healthy growth, helped by strong initial demand for the iPhone 16.
The results surpassed Wall Street expectations, but the firm also offered a modest revenue forecast that pushed its share price down nearly 2 percent on Thursday to $225.91.
It comes amid questions over whether momentum for the latest handset will continue over the holiday period, amid reports that Apple has already cut orders for the iPhone 16 by about 10 million units for the fourth quarter of this year and the first half of 2025.
Profit impact
On the surface, Apple is still a hugely profitable money-making machine, as revenues showed healthy growth, but profits certainly took a hit.
For the fourth quarter ending 28 September, Apple posted a net profit of $14.7bn, down from a net profit of $23bn in the same year-ago period.
Fourth quarter sales however rose to $94.9bn from $89.5bn a year earlier.
For the full year, Apple posted a net profit of $93.7bn, again down from a net profit of $97bn for 2023.
Full year sales were however up at $391bn from $383bn for 2023.
The profit hit came after Apple during the quarter paid a one-time income tax charge of $10.2 billion.
This was because in September Apple had been ordered by the Court of Justice of the European Union (CJEU) to pay Ireland €13bn (£11bn or $14.4 billion) in unpaid taxes – in a move that ended an eight year battle.
The case stemmed back to 2016, when the European Commission had ordered a reluctant Irish government to recover up to 13 billion euros plus interest in “illegal tax benefits”, after it found that two Irish tax rulings had artificially reduced Apple’s tax burden to as low as 0.005 percent in 2014.
“Today Apple is reporting a new September quarter revenue record of $94.9 billion, up 6 percent from a year ago,” said Tim Cook, Apple’s CEO.
“During the quarter, we were excited to announce our best products yet, with the all-new iPhone 16 lineup, Apple Watch Series 10, AirPods 4, and remarkable features for hearing health and sleep apnea detection,” said Cook. “And this week, we released our first set of features for Apple Intelligence, which sets a new standard for privacy in AI and supercharges our lineup heading into the holiday season.”
Unit breakdown
Digging into the results, Apple’s iPad business had the strongest growth of any of hardware line, with an 8 percent increase in sales to $6.95 billion.
That was partly from pent-up demand after Apple released new iPad Pro and Air models in May after going through all of 2023 without releasing new iPads.
Image credit Apple
The firm has also recently released an overdue update to the iPad Mini, but sales from this were not included in these results, and the limited update to the iPad Mini disappointed industry observers.
Image credit: Apple
Revenue in the Mac business rose 2 percent on an annual basis to $7.74 billion during the quarter, and Apple’s services business (iCloud etc) grew 12 percent to nearly $25 billion in sales. The Other Products (i.e. wearables such as the AirPods, Apple Watch, and Homepod) saw revenue down 3 percent year on year.
But all eyes were on Apple’s cash cow, the iPhone, which still accounts for nearly 49 percent of the tech giant’s overall revenues.
Overall iPhone revenue grew 6 percent, in the first sign of how the iPhone 16 is faring in the market. However it should be noted that Apple’s newest handsets only arrived on 20 September, which gave Apple about a week of new product sales in the quarter.
But a decline in China sales during the fourth quarter also concerned some analysts and investors, which helped depress Apple’s share price.
Looking forward, CFO Luca Maestri told analysts during a conference call that Apple expects “low to mid-single digit” sales growth during the December quarter.