Apple sales rise 6%, company seeing early iPhone 16 demand

 

CEO of Apple Tim Cook poses as Apple holds an event at the Steve Jobs Theater on its campus in Cupertino, California, U.S. September 9, 2024. 

Manuel Orbegozo | Reuters

Apple’s fiscal fourth-quarter results beat Wall Street expectations for revenue and earnings per share, but net income slumped after the company paid a one-time charge as part of a tax decision in Europe.

Apple shares fell as much as 2% in extended trading on Thursday.  

Here’s how the iPhone maker did versus LSEG consensus estimates for the quarter ending Sept. 28:  

• Earnings per share: $1.64, adjusted, versus $1.60 estimated 
• Revenue: $94.93 billion vs. $94.58 billion estimated 
• iPhone revenue: $46.22 billion vs. $45.47 billion estimated 
• Mac revenue: $7.74 billion vs. $7.82 billion estimated 
• iPad revenue: $6.95 billion vs. $7.09 billion estimated 
• Other Products revenue: $9.04 billion vs. $9.21 billion estimated 
• Services revenue: $24.97 billion vs. $25.28 billion estimated 
• Gross margin: 46.2% vs. 46.0% estimated 

Overall iPhone revenue grew 6%, in the first sign of how the iPhone 16 is faring in the market. Apple’s newest devices came out Sept. 20, giving Apple about a week of new product sales in the quarter. It’s still Apple’s most important product, accounting for nearly 49% of the company’s overall sales.  

Sales of the iPhone 15 were “stronger than 14 in the year-ago quarter, and 16 was stronger than 15,” Apple CEO Tim Cook told CNBC’s Steve Kovach.  

Cook said the company was looking forward to Apple Intelligence, the AI system for iPhones and Macs that started to roll out this week as part of the iOS 18.1 update.  

“We’re getting great feedback from customers and developers already and a really early stat, which is only three days worth of data: Users are adopting iOS 18.1 at twice the rate that they adopted 17.1 in the year-ago quarter,” Cook said. 

Apple said on a call with analysts that it expects “low to mid-single digit” sales growth during the December quarter. It also signaled that it expects services growth to be about the same as its growth rate for the past year, which was 12.87%.

Apple reported $14.73 billion, or 97 cents per share, in net income during the quarter, versus $22.96 billion, or $1.47 per share, in the year-ago period. Apple’s adjusted earnings per share, after removing the one-time tax charge, increased 12% on an annual basis.  

Revenue rose about 2% for the full fiscal year to $391.04 billion. Revenue in the September period was up 6%. The company’s cash pile now stands at $156.65 billion.

During the quarter, Apple paid a one-time income tax charge of $10.2 billion to resolve a long-running case dating back to 2016 over how the company handled taxes in Ireland.

Apple’s results close out a busy week of earnings for the top tech companies. Alphabet on Tuesday reported better-than-expected results, driven by cloud growth. Microsoft issued disappointing guidance on Wednesday, leading to the stock’s steepest sell-off in two years, while Meta beat estimates but warned of significant acceleration in its infrastructure expenses next year. On Thursday, Amazon reported strong growth in its cloud business.  

Apple’s iPad business had the strongest growth of any of hardware line, with an 8% increase in sales to $6.95 billion. That was partly from pent-up demand. Apple released new iPad Pro and Air models in May after going through all of 2023 without releasing new iPads.  

Revenue in the Mac business rose 2% on an annual basis to $7.74 billion during the quarter, which included back-to-school laptop sales. Cook told CNBC that the growth was driven by sales of the MacBook Air, which was updated with new chips in the spring. 

Apple’s services business — which includes online subscriptions such as iCloud, Google search revenue, and AppleCare warranties for Apple hardware — grew 12% on an annual basis to nearly $25 billion in sales. However, Apple’s services revenue came in under LSEG consensus expectations.  

The Federal Reserve may have pretty much just hit its 2% inflation target

 

Federal Reserve Chairman Jerome Powell arrives to a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC. 

Anna Moneymaker | Getty Images

This week’s inflation data provided more evidence that the Federal Reserve is nearing its objective, fresh on the heels of the central bank’s dramatic interest rate cut just a few weeks ago.

Consumer and producer price indexes for September both came in around expectations, showing that inflation is drifting down to the central bank’s 2% target.

In fact, economists at Goldman Sachs think the Fed may already be there.

The Wall Street investment bank Friday projected that the Commerce Department’s personal consumption expenditures price index for September will show a 12-month inflation rate of 2.04% when it is released later this month.

If Goldman is correct, that number would get rounded down to 2% and be right in line with the Fed’s long-held objective, a little over two years after inflation spiked to a 40-year high and unleashed an aggressive round of interest rate hikes. The Fed prefers the PCE as its inflation gauge though it uses a variety of inputs to make decisions.

“The overall trend over 12, 18 months is clearly that inflation has come down a lot, and the job market has cooled to a level which is around where we think full employment is,” Chicago Fed President Austan Goolsbee said in a CNBC interview Thursday after the latest consumer price data was released. “We’d like to get both of them to stay in the space where they are right now.”

Some obstacles ahead

While keeping inflation at bay may not be an easy task, the latest data indicates that though prices are not receding from their troublesome heights of a few years ago, the rate at which they are increasing is pulling back.

The 12-month rate for the all-items consumer price index was at 2.4% in September, while the producer price index, a proxy for wholesale inflation and a leading gauge for pipeline pressures, showed an annual rate of 1.8%.

Goldman’s projection that the PCE index is heading to 2% is also about in line with tracking from the Cleveland Fed.

The central bank district’s “inflation nowcasting” dashboard pegs the 12-month headline PCE rate at 2.06% for September, which would get rounded up to 2.1%. However, on an annualized pace, inflation for the entire third quarter is running at just a 1.4% rate — well below the Fed’s 2% goal.

To be sure, there are some caveats to show that policymakers still have some work to do.

Core inflation, which excludes food and energy and is a metric that the Fed considers a better measure of longer-term trends, is expected to run at a 2.6% annual rate for the PCE in September, according to Goldman. Using just the consumer price index, core inflation was even worse in September, at 3.3%.

Fed officials, though, see the unexpectedly high shelter inflation numbers as a major driver of the core measure, which they figure will ease as a lower trend in rents works its way through the data.

Fed Chair Jerome Powell on Sept. 30, addressing the rent situation, said he expects housing inflation to continue to recede while “broader economic conditions also set the table for further disinflation.”

From a policy standpoint, lower inflation opens the door for the Fed to keep cutting rates, particularly as it turns its attention to the labor market, though there’s some trepidation about how quickly it should move.

September’s half percentage point reduction to a fed funds range of 4.75% to 5% was unprecedented for an economy in expansion, and the Fed at the very least is expected to return to its normal quarter-point pace. Atlanta Fed President Raphael Bostic even said Thursday he’d be open to skipping a move altogether at the November meeting.

“Aggressive easing would risk spiking consumer demand just as it is settling into a sustainable pace,” PNC senior economist Kurt Rankin said in a post-PPI analysis. “This result would in turn put pressure on businesses to meet that demand, re-igniting gains in those businesses’ own costs as they jockey for the necessary resources to do so.”

Futures traders are betting on a near certainty that the Fed cuts rates by a quarter point at both the November and December meetings.