Apple AAPL reported first-quarter fiscal 2025 adjusted earnings of $2.40 per share, which beat the Zacks Consensus Estimate by 1.69%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Apple shares were up more than 3% in pre-market trading.

Apple’s Q1 Top Line Rides on Strong Services Growth

Net sales increased 4% year over year to $124.3 billion and beat the Zacks Consensus Estimate by 0.24%.
 

Apple Inc. Price, Consensus and EPS Surprise

Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote

Services revenues grew 14% from the year-ago quarter to $26.34 billion and accounted for 21.2% of sales. The figure beat the consensus mark by 0.63%.

Apple now has more than 1 billion paid subscribers across its Services portfolio, more than double what it had four years ago. Paid subscriptions grew double digits year over year in the reported quarter.

iPhone sales decreased 0.8% from the year-ago quarter to $69.14 billion and accounted for 55.6% of total sales. iPhone sales beat the Zacks Consensus Estimate by 0.07%. 

Overall, product sales (78.8% of sales) climbed 1.6% year over year to $97.96 billion. Apple’s installed base surpassed 2.35 billion active devices.

Apple’s China Sales Remain Weak, Europe & Japan Jump

Greater China sales decreased 11.1% year over year, fully offset by strong revenues from Japan and Europe, which increased 15.7% and 11.4%, respectively.

While America’s sales inched up 4.4%, the Rest of Asia Pacific’s sales increased 1.3%.

Mac & iPad Sales Rise, Wearables Decline

Non-iPhone revenues (iPad, Mac and Wearables) increased 7.7% year over year on a combined basis.

Mac sales of $8.99 billion increased 15.5% from the year-ago quarter and accounted for 7.2% of total sales. The figure beat the Zacks Consensus Estimate by 7.94%. 

iPad sales of $8.09 billion increased 15.2% year over year and accounted for 6.5% of total sales. The figure beat the Zacks Consensus Estimate by 9.49%. 

Wearables, Home and Accessories sales decreased 1.7% year over year to $11.75 billion and accounted for 9.5% of net sales. The figure beat the consensus mark by 6.37%.

Apple’s Gross & Operating Margins Expand Y/Y

The gross margin of 46.9% expanded 100 basis points (bps) on a year-over-year basis. The gross margin expanded 70 bps sequentially due to a favorable product mix.

Products’ gross margin expanded 300 bps sequentially to 39.3% due to a favorable mix. Services’ gross margin was 75%, up 100 bps sequentially.

Operating expenses rose 6.6% year over year to $15.44 billion due to a 7.4% increase in research & development expenses and a 5.7% improvement in selling, general & administrative expenses. 

Operating margin expanded 70 bps on a year-over-year basis to 34.5%.

Apple’s Balance Sheet Remains Strong

As of Dec. 28, 2024, cash & marketable securities were $141.37 billion compared with term debt of $94.8 billion.

Apple returned nearly $30 billion in the reported quarter through dividend payouts ($3.9 billion) and share repurchases ($23.3 billion).

Apple’s Q2 Revenues to Grow on Service Business

Apple expects the March quarter’s (second-quarter fiscal 2025) revenues to grow low to mid-single digits on a year-over-year basis. Unfavorable forex is expected to hurt revenues by 2.5% on a year-over-year basis.

For the Services segment, Apple expects revenues to increase low double digits on a year-over-year basis.

Gross margin is expected to be 46.5-47.5% in the second quarter of fiscal 2025. Operating expenses are expected to be between $15.1 billion and $15.3 billion.

Zacks Rank & Stocks to Consider

Currently, Apple carries a Zacks Rank #4 (Sell). 

BILL Holdings BILL, Twilio TWLO and AMETEK AME are some better-ranked stocks in the broader Zacks Computer & Technology sector. While BILL and TWLO sport a Zacks Rank #1 (Strong Buy) each, AME carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

BILL is scheduled to report its second-quarter fiscal 2025 results on Feb. 6. Twilio is set to report fourth-quarter 2024 results on Feb. 13, while AMETEK is scheduled to report its fourth-quarter 2024 results on Feb. 4.

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