Track Hyper | Apple's Q1 overall performance is impressive: revenue in Greater China slows down

Author: Zhou Yuan / Wall Street News

In the early morning of January 31, Beijing time, Apple released its financial report for the first fiscal quarter of 2025 (corresponding to the fourth quarter of the calendar year 2024).

Apple CEO Tim Cook stated, "Apple has announced the best quarterly financial report in its history."

In summary: In the quarter, Apple's most impressive revenue segment was its services business, which saw a year-on-year increase of 13.9% to USD 26.34 billion, setting a new historical high; the weakest segment was the wearables, home, and accessories product line; the iPhone product line, which accounts for over 50% of revenue, faces severe competitive challenges.

In the fourth quarter of 2024, Apple achieved revenue of USD 124.3 billion, a year-on-year increase of 3.95%, setting a new historical record; net profit reached USD 36.33 billion, a year-on-year increase of 7.12%; gross margin was 46.9%, the highest level in Apple's history. Previously, Apple had expected the gross margin for the quarter to be between 46.5% and 47.5%.

Despite a significant year-on-year decline of 11.08% in revenue from the Greater China region (ranking third in Apple's revenue), which amounted to USD 18.513 billion (expected USD 21.33 billion), significantly dragging down Apple's overall growth rate, Apple still set new historical records for quarterly revenue, profit, and gross margin due to a surge in service revenue.

In the first quarter of fiscal year 2025, the Greater China region was the only major market for Apple that experienced a decline in revenue, while other regions such as the Americas, Europe, Japan, and Asia-Pacific all saw revenue growth.

From a product category perspective, the iPhone product line had net sales of USD 69.14 billion (expected USD 71.03 billion), slightly lower than the USD 69.7 billion from the same period last year (a year-on-year decline of 0.8%), accounting for 55.62% of revenue, making it Apple's largest revenue segment. Although revenue for the quarter saw only a slight year-on-year decline, its revenue share exceeding half indicates that Apple's hardware business faces severe challenges.

In the quarter, the iPad product line achieved net sales of USD 8.09 billion (expected USD 7.32 billion), an increase of 15.2% compared to USD 7.02 billion last year; the Mac product line had net sales of USD 8.99 billion (expected USD 7.96 billion), higher than USD 7.78 billion from the same period last year, with a year-on-year increase of 15.6%, achieving the highest growth rate since the fourth quarter of fiscal year 2022.

Apple's net sales for the wearables, home, and accessories product line in the first fiscal quarter of 2025 were USD 11.75 billion (expected USD 12.01 billion), slightly lower than USD 11.95 billion from the same period last year (a year-on-year decline of 1.7%).

Overall, in Apple's two main business segments of "software and hardware," both the Mac and iPad product lines achieved year-on-year revenue growth, but the iPhone product line fell far short of expectations, seemingly due to poor sales of the iPhone 16 series in the Greater China region Cook explained that the reasons for the decline in revenue in the Greater China region include changes in channel inventory, the non-launch of Apple Intelligence, and the newly released national subsidy policy in China.

Among these, "changes in channel inventory" have a significant impact. If this factor is excluded, Apple's revenue decline in the Greater China region could be narrowed by more than half; additionally, the lack of launch of Apple Intelligence in the Chinese market has also dragged down Apple's revenue from smartphones in the Greater China region.

Cook stated that the iPhone 16 series will see stronger sales in regions where Apple Intelligence is available. Currently, Apple Intelligence is only available in a few English-speaking countries (the UK, Canada, and Australia).

According to the "Monthly India Smartphone Market Tracking Report" released by Counterpoint on January 31, 2024, the wholesale revenue of the Indian smartphone market is expected to grow by 9% year-on-year, reaching a historical high. Apple has led the Indian market in sales for the second consecutive year and has entered the top five in terms of shipment volume for the first time in the fourth quarter of 2024.

Cook mentioned, "Apple plans to release more language versions of Apple Intelligence in April, including French, German, Italian, Portuguese, Spanish, Japanese, Chinese, and Simplified Chinese." However, Cook did not specify the timeline for the launch of Apple Intelligence in the Greater China region.

The sales of Apple's latest iPhone in mainland China are facing strong challenges from domestic smartphone brands such as Huawei and Xiaomi.

According to an IDC report, in the fourth quarter of 2024, the shipment volume of the Chinese smartphone market is approximately 76.43 million units, a year-on-year increase of 3.9%. Among them, Apple's iPhone market share is 17.4% (shipment volume of 13.3 million units, declining for three consecutive years), although it still ranks first, the year-on-year growth rate has decreased by 9.6%.

The IDC report states that for the entire year of 2024, Apple's market share is 15.6%, dropping to third place in the Chinese market.

Apple's smartphones have seen a significant lack of innovation in recent years, and in multiple dimensions (such as battery life, signal, screen, photography, and AI), the technological innovations are no longer as competitive as those of Chinese counterparts, leading to increasing competitive pressure on Apple's smartphones in the Chinese market.

It is worth noting that the impact of Apple's revenue slowdown in the Greater China region is not very significant, as it has set new revenue records in several markets, including Latin America, the Middle East, and South Asia; Cook places great importance on the emerging market of India, believing that there is still considerable room for Apple to increase its market share in India.

Looking to the future, Cook remains optimistic, especially with the launch of Apple Intelligence, which he expects will drive consumer upgrades and purchases.

"The company's record revenue and strong operating profit margins have driven earnings per share to a historic high, achieving double-digit growth, allowing the company to return over $30 billion to shareholders," said Apple CFO Kevin Parker. "The number of active devices installed by Apple has reached a historic high across all product categories and geographic regions."

Additionally, Apple's board of directors announced a cash dividend of $0.25 per share to the company's common stock shareholders. This dividend will be distributed on February 13 to shareholders on record as of the close of business on February 10 From the performance of the quarterly financial report, Apple hides structural risks under overall growth, with the slowdown in the Greater China market and the decline in iPhone competitiveness sounding alarm bells.

If breakthroughs cannot be achieved in innovation, pricing, and localization, its market share in China may be further eroded by domestic manufacturers. Whether it can revitalize growth by leveraging AI and ecological advantages in 2025 will be a key test.

Fortunately, Cook provided an encouraging attitude during the earnings call.

Regarding iPhone technological innovation, Cook said, "I believe there is still a lot to come in the future; the innovation of the iPhone is far from over, and there is still much room for innovation in smartphones. I am incredibly optimistic about our product line."