Recap: Apple reports 1st-quarter earnings beat, Tim Cook talks China revenue miss and Vision Pro launch

• Apple reported a profit and revenue beat for its fiscal first-quarter earnings on Thursday.

• The company's stock dropped 3% after-hours on China revenue that missed estimates.

• Tim Cook talked about declining China revenue and the new Apple Vision Pro in a call with analysts.

Apple reported first-quarter earnings on Thursday, and the results beat Wall Street estimates.

The company reported its first year-over-year sales gain in over a year, but shares slid more than 3% in after-hours trading as revenue in China came in lower than expected.

Apple CEO Tim Cook kicked off the call on Thursday night. He talked about declining revenue in China and Apple's imminent Vision Pro release

Cook calls generative AI a 'huge opportunity for Apple.'

The CEO again notes that he doesn't want to announce anything too soon. But expect some AI announcements from Apple.

Cook says he remains 'very optimistic' about China in the long term.

An analyst asks Cook whether he thinks Apple could resume growth in the Chinese market. Cook points to growth in the number of people upgrading their iPhones in China.

Cook comments on declining revenue in the Chinese market.

"Obviously we'd prefer not to contract," Cook says.

The CEO notes Apple saw solid growth on upgraders year over year in China mainland and its products represented four of the top six smartphone models in urban China in fiscal Q1.

Apple’s VisionPro involves 5,000 patents, Cook says.

Cook says he doesn't want to compare the headset's trajectory to any other Apple products. "Each product has its own journey," Cook says.

Apple doesn't want to talk about any new AI announcements before it delivers them, Cook says.

"We've got some things that we're incredibly excited about that we'll be talking about later this year," he says.

Apple says it has some big-name enterprise customers investing in the Vision Pro.

Companies including Walmart, Nike, Vanguard, SAP, and Bloomberg are exploring uses of the Vision Pro for their customers or employees, Apple's CFO says.

Meanwhile, some companies, including Netflix and YouTube, have signaled they do not plan to launch apps on the device — at least for now.

More people than ever are upgrading their iPhones.

Apple's CFO says the company hit an all-time record for iPhone upgrades in fiscal Q1.

Tim Cook says Apple will share more about its latest AI work 'later this year.'

The company is racing to keep up with companies like OpenAI and Meta in the AI arms race.

As Apple execs speak on the earnings call, Apple Stores are preparing for the Vision Pro release Friday.

The $3,499 headset hits stores on February 2. Apple has already reportedly sold more than 200,000 Vision Pro headsets. Those curious to try out the device without paying for it can go to participating Apple Stores starting Friday for first-come-first-serve demos.

Tim Cook kicks off Apple's earnings call after some apparent technical difficulties.

The earnings call started with some silent periods and then the hold music came back on.

Weak sales in China drive decline in Apple stock.

Apple avoided its fifth straight quarter of revenue declines, with sales growing 2.1% during the holiday quarter to $119.6 billion.

But a 13% year-over-year decline in Apple's China sales overshadowed the results. Apple reported China revenues of $20.8 billion, well below analyst estimates of $23.5 billion.

The company has been navigating increased competition in smartphone sales from Huawei, sluggish economic growth in China, and the Chinese government banning certain personnel from using iPhones as their personal phone.

Apple stock fell as much as 2.5% in after-hours trading, but has since slightly recovered and is now down 1.7% as of 4:50 pm.

Apple reports profit and revenue beat

1st quarter results

• Revenue: $119.58 billion vs $117.97 billion estimate

• Products revenue: $96.46 billion vs $95.14 billion estimate

  • iPhone revenue: $69.7 billion vs $68.55 billion estimate

  • Mac revenue: $7.78 billion vs $7.9 billion estimate

  • iPad revenue: $7.02 billion vs $7.06 billion estimate

  • Wearables, home and accessories: $11.95 billion vs $12.02 billion estimate

• Service revenue: $23.12 billion vs $23.37 billion estimate

• Greater China revenue: $20.82 billion vs $23.5 billion estimate

• EPS: $2.18 vs $2.11 estimate

• Total operating expenses: $14.48 billion vs $14.62 billion estimate

• Gross margin: $54.86 billion vs $53.56 billion estimate

• Cash and cash equivalents: $40.76 billion vs $38.81 billion estimate

• Cost of sales: $64.72 billion vs $65.01 billion estimate

• Total current assets: $143.69 billion vs $157.25 billion estimate

• Total current liabilities: $133.97 billion vs $142.36 billion estimate

Apple stock jumps 1% heading into earnings

Apple stock rose 1.1% to $186.49 Thursday afternoon ahead of its first-quarter earnings report.

The gain slightly outpaced the S&P 500's gain of about 1%, and was just below the Nasdaq 100's gain of 1.2%.

Apple stock has been flirting with all-time highs in recent weeks. While the stock is down just over 3% year-to-date, it is up 9% over the past three months and has surged 29% over the past year.

Apple stock would have to surge 7% from current levels to eclipse its previous record high of $199.62, which it reached last month.

Goldman Sachs says recent price increases will help drive solid growth in Apple's Services business

Apple should deliver "in-line" results on Thursday, with much of the debate among Wall Street shifting to guidance, ongoing regulation issues, and the strength of the App Store, according to a recent note from Goldman Sachs.

The bank expects Apple to report earnings per share of $2.10, revenue of $117.4 billion, and gross margins of 45.0%, with iPhone revenue jumping 3% year-over-year thanks to the iPhone 15 lineup. But other product lines should see a decline in revenue growth.

"We expect double-digit revenue declines in iPad (-22% year-over-year) and Wearables, Home, and Accessories (-14%) on difficult year-ago comps that benefited from new product launches," Goldman Sachs said.

Meanwhile, the bank expects Apple's Services revenue to grow 11%, driven by recent price increases and a pickup in App Store sales.

"We'd expect Services revenue to benefit from increasing penetration of all services, particularly iCloud+ as data consumption growth outpaces device storage and AppleCare+ as devices become more expensive and the mix of direct sales (and opportunities to sell AppleCare+ directly) increases," Goldman said.

Goldman Sachs rates Apple at "Buy" with a $223 price target.

Wedbush is optimistic on Apple's iPhone and Services business during the busy holiday quarter

Wedbush analyst Dan Ives said Apple will likely beat its first-quarter revenue and profit estimates on Thursday even with growing investor concerns about its iPhone sales.

"The big focus on the Street naturally will be on iPhone and double-digit growth for Services revenue which we both believe performed relatively well during the holiday quarter as the $68 billion iPhone revenue bogey and $23 billion Services estimate are hittable/beatable," Ives said in a note on Wednesday.

China iPhone sales, which represent about 20% of the company's total iPhone sales, will be a big focus on the earnings call as competition from Huawei increases — but according to Ives, sales trends have been steady.

Wedbush rates Apple at "Outperform" with a $250 price target.

JPMorgan says potential profit margin gains could boost Apple's stock price

Profit results should have a bigger impact on Apple's stock price than revenue, according to a recent note from JPMorgan.

The bank said investors should have largely moved past concerns about iPhone sales weakness, with recent data points such as Apple rising past Samsung to become the global market leader in smartphone shipments offering encouragement.

"With the robust sell-in volumes in F1Q24, current expectations from investors have moved to a modest beat led by robust iPhone numbers, even though accompanied on the flip-side by above-seasonal iPhone decline into F2Q," JPMorgan said.

JPMorgan rates Apple at "Overweight" with a $225 price target.

Commentary surrounding iPhone sales in China will be a key focus for investors, Bloomberg Intelligence says

Apple's iPhone sales in China have faced several headwinds in recent months as weakness in the Chinese economy has become more apparent, and that could have an impact on Apple's first-quarter results.

"Apple's 1Q results will likely indicate iPhone sales pressure in the greater China region amid increased competition from Huawei and reduced consumer spending," Bloomberg Intelligence analyst Anurag Rana said in a recent note.

Rana also wrote that in addition to commentary about potential App Store changes due to regulations, investors will be eager to hear about progress in the launch of the Vision Pro. Rana estimates that Apple could generate $1.5 billion in Vision Pro sales this year.

Apple's consensus first-quarter revenue estimate is $117.97

1st quarter

• Revenue estimate: $117.97 billion

• Products revenue estimate: $95.14 billion

  • iPhone revenue estimate: $68.55 billion

  • Mac revenue estimate: $7.9 billion

  • iPad revenue estimate: $7.06 billion

  • Wearables, home and accessories estimate: $12.02 billion

• Service revenue estimate: $23.37 billion

• Greater China rev. estimate: $23.5 billion

• EPS estimate: $2.11

• Operating cash flow estimate: $34.58 billion

• Total operating expenses estimate: $14.62 billion

• Gross margin estimate: $53.56 billion

• Cash and cash equivalents estimate: $38.81 billion

• Cost of sales estimate: $65.01 billion

• Total current assets estimate: $157.25 billion

• Total current liabilities estimate: $142.36 billion

Source: Bloomberg

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