Initial Impression From Apple’s 4Q23 Earnings, Key Numbers From Apple 4Q23, About Apple’s 1Q24 Guidance

Hello everyone. Welcome to a special Friday edition of the Daily Update. We will begin our Apple’s earnings review. The discussion will be purposely kept broad for now. Next week, we will dive into some of the nitty gritty. Let’s jump right in.

Initial Impression From Apple’s 4Q23 Earnings

Apple’s financial performance is trending very close to our existing assumptions. Underlying demand for Apple hardware appears to be down low single digits driven by slowing upgrading trends, especially with the iPad, Mac, and AirPods. Mostly offsetting HW weakness, Services revenue momentum continues to build with growth re-accelerating despite Apple working with a much larger base.

While Apple’s 1Q24 guidance may have disappointed some, when excluding one-time factors including calendar year differences and COVID supply issues, Apple guided to roughly flat revenue growth. Meanwhile, Apple’s 45% to 46% gross margin guidance was stellar. The Apple story remains firmly intact heading into 2024 and Apple’s most important product launch in nearly a decade with Vision Pro.

Key Numbers From Apple 4Q23

Here are Apple’s reported 4Q23 results versus my expectations with brief commentary for each item.

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My 4Q23 Apple Estimates, Early Thoughts on Apple’s 1Q24, My Current Apple Earnings Model

Apple reports FY4Q23 earnings on Thursday. Today’s update contains the second half of Neil’s earnings preview. The first half is available here. The update begins with Neil’s granular financial estimates. The discussion includes qualitative explanations for estimates related to Apple’s product categories. We then look at Neil’s expectations for what Apple will say about guidance (FY1Q24). We conclude with Neil’s updated Apple earnings model and how the model has changed over the past three months. Access to Neil’s Apple earnings model is a benefit associated with Above Avalon membership at no additional cost.

Hello everyone. Welcome to November.

We will continue our Apple 4Q23 earnings preview with a look at my granular estimates. The update also includes a few thoughts on Apple’s FY1Q24 guidance and my updated earnings model.

In keeping with our usual practice, tomorrow’s update (Thursday) will be pushed back a day so that we have a special Friday edition of the update to review Apple’s earnings. Apple will release earnings Thursday at 4:30 pm ET.

My 4Q23 Apple Estimates

Here are my granular estimates for Apple’s 4Q23:

  • Revenue: $88.9B (consensus: $84.2B)

  • Overall gross margin: 44.9% (guidance: 44% to 45%)

  • Gross margin (HW): 36.7%

  • Gross margin (Services): 70.7%

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Setting the Stage for Apple’s FY4Q23 Earnings

Welcome to a new week. For today's update, we will kick off my Apple earnings preview with an overview of the setup heading into Thursday’s release. The plan is to continue the earnings preview on Wednesday.

As a reminder, Apple's "Scary Fast" online product event will take place tonight at 8 pm ET. We will talk about the announcements tomorrow.

Setting the Stage for Apple’s FY4Q23 Earnings

The setup heading into Apple earnings on Thursday is trending a tad positive. FY4Q results are notorious for being noisy quarters as supply issues cloud underlying demand for iPhone and Apple Watch. This was especially true this year as iPhone 15 Pro and Phone 15 Pro Max were in short supply at the end of September. The iPad and Mac will also likely fuel some ugly headlines with tough year-over-year compares. However, my expectation includes enough variables moving in the right direction to get Apple over its 4Q23 earnings expectations bar.

  • Margins remain impressive. Management guided close to a 11-year quarterly high for gross margin percentage.

  • Services revenue is trending stronger. Apple has been seeing growth in advertising, cloud services, and the App Store. The impact from price increases in 2022 for Music and TV+ will also help results. When considering Apple’s entire business, Services (and probably Apple Watch) come across as having the most impressive momentum.

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