Apple FY25Q2 earnings correspond to the actual period of January/February/March 2025.
Apple FY2025 Q2 Earnings Summary:
Revenue $95.4B, up 5% year over year, FX headwind of 2.5 percentage points on revenue this quarter; net income $24.8B, up 5% year over year;
Gross margin 47%, up 0.4 percentage points year over year; of which Products gross margin 35.9%, down 0.7 percentage points year over year, Services gross margin 75.7%, up 1.1 percentage points year over year;
Operating margin 31%, up 0.3 percentage points year over year; net margin 26%, flat year over year;
Active installed base of all products globally reached a new all-time high (devices that have used Apple services within 90 days are considered active; FY25 Q1 was over 2.35B).
iPhone revenue $46.8B, up 2% year over year; iPhone grew year over year in every region; iPhone upgrade units up double digits year over year;
Services revenue $26.6B, up 12% year over year, tenth consecutive quarter reaching a record high; Services transacting accounts and paid accounts at record highs, both up double digits year over year; global paid subscriptions over 1B (not updated for 6 quarters), customer engagement continues to grow; Apple Pay active users at a record high, up double digits year over year; Services revenue breakdown not disclosed for the third consecutive quarter;
Mac revenue $7.9B, up 7% year over year, Mac grew year over year in every region; iPad revenue $6.4B, up 15% year over year;
Wearables, Home and Accessories revenue $7.5B, down 5% year over year, seventh consecutive quarter of year-over-year decline;
Greater China revenue $16.0B, down 2% year over year, seventh consecutive quarter of year-over-year decline; excluding FX impact, revenue roughly flat; Greater China operating margin 41.4%, only higher than Rest of Asia Pacific; this marks the fourth consecutive quarter where only Greater China revenue declined year over year; Japan remained the fastest-growing region this quarter;
Apple continues to gain ground in numerous global markets: this quarter revenue reached quarterly records in the UK, Spain, Finland, Brazil, Chile, Turkey, Poland, India, and the Philippines; Enterprise services won the KPMG deal, all US employees equipped with iPhone 16; won a Latin America New Bank deal for thousands of MacBook Airs;
FY25Q3 revenue is guided to grow in the low-to-mid single digits year over year; due to uncertainty, management did not provide a Services growth guide. Gross margin 45.5%–46.5%, including $900M in tariff costs; opex $15.3B–$15.5B. This implies Q3 revenue growth of roughly 3% year over year and net income down roughly 2% year over year; EPS may be flat after massive buybacks.
This quarter repurchased $25B, dividends $3.8B, net cash $35B; announced $100B buyback program, dividend increased 4%;
On tariffs: expecting the majority of iPhones sold in the US next quarter to be produced in India, iPad/Mac/Watch/AirPods in Vietnam; China will remain the origin for markets outside the US; no significant demand pull-forward due to tariffs observed, but the company did pre-build inventory; this quarter tariff impact was limited due to supply chain and inventory optimization, but next quarter will add $900M in cost;
Announced $500B investment in the US over the next four years, covering COGS, opex, and capex; data center investment will use a mixed self-build + third-party strategy; 2025 plans to procure tens of millions of advanced chips in Arizona;
Overall, Apple's earnings remain as uninspiring as ever; its growth rate (revenue YoY +5%, net income YoY +5%, forward PE 27.0x) continues to rank last among the four giants' earnings: Microsoft (revenue YoY +13%, net income YoY +18%, forward PE 32.0x), Google (revenue YoY +12%, net income YoY +46%, forward PE 18.1x), Amazon (revenue YoY +9%, net income YoY +64%, forward PE 31.3x). Previously repeatedly emphasized: Microsoft, Google, and Amazon all delivered solid profit results despite massive AI investment, yet the market still worries about overinvestment hurting profits, while harboring great fantasies about Apple's AI at a stage of relatively low investment. Last year's WWDC Apple Intelligence pie has not fully materialized, and this year's WWDC is fast approaching.
Apple's core growth formula: AAPL = active installed base * customer engagement.
Although both sides of Apple's core growth formula are still growing, the pace is slow, and valuation is not low (10-year average PE midpoint 22.7x). Notably, beyond hardware weakness, Apple's flywheel is now seeing software deceleration as well.