The best analyst questions from Apple’s earnings call

By most accounts, Apple had a very good fourth quarter, posting record revenue and profit and beating analysts’ expectations. Apple certainly thought the quarter went well.

Here’s our count of some of the superlatives bandied about, mostly by Apple executives, on the earnings call:

• “Best” 11x

• “All-time” 24x

• “Ever” 10x

• “Record” 39x

The quarter that ended in September was indeed very good, with iPhone sales growing 6% from a year earlier — a number the company said would be higher if not for supply constraints — and revenue from its Services division reaching an all-time high. And Apple’s guidance for its all-important holiday quarter is predicting the highest iPhone and total revenue ever.

Of course, Apple’s executives, including its unflappable and very media savvy CEO, Tim Cook, are always touting records, even in less superlative quarters. Part of that has to do with the fact that so many people are already locked in to Apple’s walled garden of products and services that it’s tough for Apple revenue not to grow. That’s especially the case amid a natural upgrade cycle, when the phones and other devices people bought en masse around the pandemic are finally crapping out and are in need of an upgrade.

That makes the analyst portion of the earnings call more illuminating, as they asked the knottier questions to help sniff out what’s luck or lock-in versus true business acumen — lest investors think Apple earnings reports are all puppies and rainbows.

Here’s an edited selection of our favorite questions from Thursday’s earnings call — some of which Apple even answered!

Question (Erik Woodring, Morgan Stanley): Why is the iPhone 17 having the degree of success that it is at this point? Is it the installed base replacement cycle kicking in or are there specific features or functionality consumers are buying it for?

Answer (Apple CEO Tim Cook): I think it’s all about the product. The product lineup is incredibly strong, our strongest ever. The 17 Pro is the most Pro phone we’ve ever done. The iPhone Air feels so thin and so light in your hand, it feels like it’s going to fly away. And then the 17 phone is an incredible value and takes several of the features that were reserved for Pro before and brings them down to the consumer lineup. So, overall, strongest iPhone lineup ever, and it’s resonating around the world.

Question (Michael Ng, Goldman Sachs): What portion of demand is coming from upgraders (people who already have iPhones) versus switchers (people who have Androids)?

Answer (Cook): We did set a September quarter record for upgraders, and so it was a great quarter from that point of view. It’s really too early in the cycle on 17 to make any comments about upgraders or switchers.

Question (Ng): What drove the higher Services revenue growth?

Answer (Apple CFO Kevan Parekh): I think that the way we look at it is, it’s not one thing to point to that would’ve driven this higher performance. Our Services portfolio is very broad, with a broad range of businesses, all that have different growth profiles and different performance characteristics. So those can vary in a given quarter.

Question (Ben Reitzes, Melius Research): Was Services revenue, which includes total acquisition cost (TAC) payments from Google, impacted by the resolution of the Google monopoly trial ruling?

Answer (Parekh): There was no TAC-related impact. What I would say is our strong performance for the quarter is really organically driven.

Question (Krish Sankar, TD Cowen): What’s contributing to the iPhone supply constraints, and how much business did you leave on the table because of it?

Answer (Cook): To be clear, the constraint was not related to manufacturing capacity per se. It was that we called the number of iPhone 16s that we were going to make and were a bit short of where the demand really was. So we could have sold more. We’re not, publicly at least, estimating the extent of that. And then, on iPhone 17 family, the demand is very strong. And so we obviously came out of the Q4 time frame with lots of back orders.

Question (Amit Daryanani, Evercore): What caused the weakness in China sales?

Answer (Cook): The Greater China revenue was down 4% year over year in the September quarter. It was driven by iPhone. And if you look at iPhone, the majority of the sequential year-over-year change was due to supply constraints that I mentioned earlier. And so it was basically supply constraints that drove the results. We’re thrilled with what we’re seeing right now, with traffic being up significantly year over year and the reception of the 17 family. We expect to return to growth this quarter.

Question (Richard Kramer, Arete): Are you seeing evidence that AI capabilities or features are a material purchase consideration for consumers or are the record sales levels you’re reporting simply reflecting other factors like the retention of your iOS base?

Answer (Cook): There are many factors that influence people’s purchasing considerations. We don’t have a great in-depth survey yet on the current iPhone 17 because it’s very new in the cycle, and we give it some time to formulate. But I would say that Apple Intelligence is a factor. And we’re very bullish on it becoming a greater factor.

Question (Kramer): In the wake of nearly every other large tech company massively increasing their capex in advance of AI demand, do you anticipate Apple altering its long-standing hybrid approach to your own and third-party data centers?

Answer (Parekh): We are expecting increases in our capex spending related to AI investments. And we do believe this hybrid model has served us very well, and we continue to want to leverage it.