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Apple’s Q4: Performance and Potential All-in-One

Big tech had a rough earnings season. The five mega-caps were down by an average of 12% after earnings. The sixth mega-cap—Apple—was the standout, with its shares trading flat following the company’s September results. The reasoning is that investors place more value on today’s performance than on estimates of future growth. However, with Apple, the beauty is that investors are buying both performance and potential.


Amidst talk of a softening macro from Microsoft, Google, Meta and Amazon, Apple reported 8% revenue growth, 4% earnings growth and was the only big tech company to effectively guide December revenue and earnings inline with expectations. Performance was—and is—expected to remain solid for one critical reason: Consumers need Apple’s products. Once thought of as a luxury, the iPhone has become a necessity with over 1B users upgrading their devices on a continuum. For consumers, the decision to upgrade has become less about getting the latest features and more about maintaining an operable and reliable smartphone. As evidence of this shift, the iPhone upgrade frequency has stabilized over the past two years, after a four-year period of extending.

The resilience of iPhone sales is made clear by the segment’s September quarter growth of 10% y/y in the face of a 47% comp. Numbers would have been stronger if not for persisting supply constraints on the Pro models, with global lead times ranging between 3-4 weeks compared to a typical 1-week lead time at this point in the cycle.

Additional performance came from the Mac, up 25% y/y, coming in 25% ahead of expectations. That growth will cool in the December quarter, offset by what Apple expects to be a rebound in the iPad segment. The biggest negative was a slowdown to Apple’s Services segment to 5% y/y compared to June (12%) and March (17%). Despite that mix shift, the company still slightly exceeded Street earnings estimates. That’s performance.


Largely missing in the conversation of Apple’s fourth-quarter earnings was the company’s growth optionality. Tesla has the opportunity of autonomy, solar and robotics. Meta has Web 3.0.

Apple has growth optionality within three potential addressable markets that I’ve talked about before. This includes health, AR and auto. One of these three opportunities will likely come to fruition and set up the company for another decade of solid performance.

A word on FX

FX is having a measurable negative impact on Apple, reportedly more than other big tech companies. I’ll spare the details of the FX adjustments and call it awash like the times when FX has left a positive impact on the company. And, when FX is a tailwind, I won’t hold it against Apple.


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