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Apple Reports Fourth Quarter Results

Company revenue sets September quarter record Services and Mac revenue reach new all-time high

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Apple inc. (nasdaq:aapl) q4 2023 earnings call transcript.

Apple Inc. (NASDAQ: AAPL ) Q4 2023 Earnings Call Transcript November 2, 2023

Apple Inc. beats earnings expectations. Reported EPS is $1.46, expectations were $1.39.

Operator: Good day, and welcome to the Apple Q4 Fiscal Year 2023 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Suhasini Chandramouli, Director of Investor Relations. Please go ahead.

Suhasini Chandramouli: Thank you. Good afternoon, and thank you for joining us. Speaking first today is Apple's CEO, Tim Cook. And he'll be followed by CFO, Luca Maestri. After that, we'll open the call to questions from analysts. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook, including the potential impact of macroeconomic conditions on the company's business and results of operations. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast.

For more information, please refer to the risk factors discussed in Apple's most recently filed annual report on Form 10-K and the Form 8-K filed with the SEC today along with the associated press release. Apple assumes no obligation to update any forward-looking statements, which speak only as of the date they are made. I'd now like to turn the call over to Tim for introductory remarks.

Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $89.5 billion for the September quarter. We achieved an all-time revenue record in India, as well as September quarter records in several countries, including Brazil, Canada, France, Indonesia, Mexico, the Philippines, Saudi Arabia, Turkey, the UAE, Vietnam and more. iPhone revenue came in ahead of our expectations, setting a September quarter record, as well as quarterly records in many markets, including China mainland, Latin America, the Middle-East, South Asia and an all-time record in India. In services, we set an all-time revenue record with double-digit growth and ahead of our expectations. During the September quarter, we continue to face an uneven macroeconomic environment, including foreign exchange headwinds and we've navigated these challenges by following the same principles that have always guided us.

We've continued to invest in the future and manage for the long-term. We've adapted continuously to circumstances beyond our control, while being thoughtful and deliberate on spending. And we've carved a path of groundbreaking innovations and delivered with excellence every step of the way. That includes Apple Vision Pro, which has gotten such an amazing response from developers who are currently creating truly incredible apps. We're excited to get this magical product in the hands of customers early next year. Now let me share more about our products, beginning with iPhone. iPhone revenue came in at $43.8 billion, 3% higher than a year ago, and a new record for the September quarter. This fall, we were thrilled to debut the iPhone 15 lineup.

The all-new iPhone 15 and iPhone 15 Plus feature a gorgeous design, powerful cameras and the intuitive Dynamic Island. Powered by the industry-leading A17 Pro, our iPhone15 Pro lineup has a beautiful strong and durable titanium design and the best iPhone camera system ever, including a 5X Telephoto lens on iPhone 15 Pro Max. Customers are loving the entire iPhone 15 family and reviews have been off the charts. In Mac, revenue came in at $7.6 billion, down 34% year-over-year from the prior year's record quarter. This was due to challenging market conditions, as well as difficult compares against the supply disruptions and subsequent demand recapture we experienced a year ago. Earlier this week, we were excited to unveil the next generation of Apple silicon with our incredible family of M3 chips, M3; M3 Pro; and M3 Max.

We're continuing to innovate at a tremendous pace. And our industry-leading lineup of personal computers just got even better. The new MacBook Pro lineup brings our most advanced technology to our Pro users, while iMac, the world's best-selling all-in-one, just got faster and more capable. And according to the latest data from Student Monitor, nearly two out of three college students chose a Mac. We couldn't be more excited about the future. Turning to iPad. Revenue for the September quarter was $6.4 billion. iPad sets the gold standard for tablets and our competitors are unable to match the iPad experience that is enabled by our seamless integration of hardware and software. iPad is also our most versatile product. In classrooms around the world, it's helping educators bring lessons to life, while giving students a window into the world around them.

And in artist workshops, design studios and everywhere else, creative minds come together, iPad supercharges the creative process, helping users take their ideas farther than they ever could before. Across wearables, home and accessories, revenue came in at $9.3 billion. Apple Watch has become essential in our lives and this is our best Apple Watch lineup ever. With Apple Watch Series 9 and Apple Watch Ultra 2, we're giving people even more tools to stay safe and live healthy, active lives. With the new double tap gesture, users can easily control Apple Watch Series 9 and Apple Watch Ultra 2 using just one hand and without touching the display. It feels like magic. Our latest Apple Watch lineup also includes our first-ever carbon-neutral products, a significant achievement of innovation and determination.

Apple's unique ecosystem of hardware, software, and services delivers an unparalleled user experience. During the quarter, we also had the chance to introduce a range of exciting new updates to our software that will allow users to get even more out of their devices. Whether it's personalized contact posters and new face time features in iOS 17, new tools for users to make their experience their own in macOS Sonoma and iPadOS 17, or a bold new look in watchOS 10 that lets you see and do more, faster than ever, Apple is delivering an even better, richer experience that users are loving. Services revenue set an all-time record of $22.3 billion, a 16% year-over-year increase. We achieved all-time revenue records across App Store, advertising, AppleCare, iCloud, payment services, and video, as well as the September quarter revenue record in Apple Music.

Whether subscribers are waking up to headlines on Apple News+, getting their morning workout in with Fitness+, feeling the beat with Apple Music on their way to work or school, or unwinding at the end of the day with Apple Arcade, we have so many different services to enrich their day. Apple TV+ continues to delight customers as well, with new and returning shows like the Morning Show, Lessons in Chemistry and Monarch. We're telling impactful stories that inspire imagination and stir the soul. Making movies that make a difference is also at the heart of Apple TV+ and we were thrilled to produce Martin Scorsese's Killers of the Flower Moon, a powerful work of cinema that premiered in theaters around the world last month. We're proud to say that since launch, just over four years ago, Apple TV+ has earned nearly 1,600 award nominations and nearly 400 wins.

We also offer subscribers an unprecedented live sports experience with MLS Season Pass. We couldn't be more pleased with how our partnership with Major League Soccer has gone in its first year. Subscriptions to MLS Season Pass have exceeded our expectations and we're excited to continue that momentum next year. With the playoffs now underway, we can't wait to see who takes home MLS cup. And nowhere does the magic of Apple come alive more than it does in our stores. Over the past year, we've continued to find ways to connect with even more customers. We welcomed customers to our first-ever retail locations in India. We also opened doors to new stores in Korea, China and the UK and expanded the Apple store online to Vietnam and Chile. And we have another store opening in China this week.

In September, I joined our team at Apple Fifth Avenue on launch day and the energy and excitement were unbelievable. Every time we connect with the customer, we're reminded why we do what we do. From simple joys of creating and sharing memories, to lifesaving features like emergency SoS via satellite, we're enriching lives in ways large and small. And whether we're working to safeguard user privacy, ensure technology made by Apple is accessible for everyone, or build an even more inclusive workplace, we're determined to lead with our values. Our environmental efforts are a great example of the intersection of our work and our values. Across Apple, we act on a simple premise, the best products in the world should be the best products for the world.

We've made our environmental work a central focus of our innovation, because we feel a responsibility to leave the world better than we found it and because we know that climate change cannot be stopped, unless everyone steps up and does their part. Our first ever carbon-neutral products represent a major milestone and we're going to go even further. We plan to make every product across our lineup carbon neutral by the end of the decade. And we're not doing it alone. Over 300 of our suppliers have committed to using a 100% clean energy for Apple production by 2030. We also continue to invest in entrepreneurs who are lighting the way for a greener, more equitable future. Through our third impact accelerator class, we're proud to support a new class of diverse innovators on the cutting edge of green technology and clean energy.

Apple is always looking forward, driven in equal measure by a sense a possibility and a deep belief in our purpose. We're motivated by the meaningful difference we can make for our customers and keenly determined to push the limits of technology even further. And that's why I'm so confident that Apple's future is bright. With that, I'll turn it over to Luca.

Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets.

Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange.

Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia .

Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips.

Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year.

We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem.

And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction.

Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities.

We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment.

Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to at the beginning of the call.

The color we are providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Also, on foreign exchange, we expect a negative year-over-year revenue impact of about 1 percentage point. As a reminder, the December quarter this year will last the usual 13 weeks, whereas the December quarter a year ago spanned 14 weeks. For clarity, revenue from the extra week last year added approximately 7 percentage points to the quarter's total revenue. Despite having one less week this year, we expect our December quarter, total company revenue to be similar to last year. We expect iPhone revenue to grow year-over-year on an absolute basis. We also expect to grow after normalizing for both last year's supply disruptions and the one extra week.

We expect Mac year-over-year performance to significantly accelerate from the September quarter. We expect the year-over-year revenue performance for both iPad and Wearables, Home and Accessories to decelerate significantly from the September quarter due to a different timing of product launches. On iPad, we launched a new iPad Pro and iPad 10th Generation during the December quarter a year ago. For the Wearable category, last year we had the full December quarter benefit from the launches of the AirPods Pro 2nd Generation, the Watch SE, and the first Watch Ultra. For our Services business, we expect the average revenue per week to grow at a similar strong double-digit rate as it did during the September quarter. We expect gross margin to be between 45% and 46%.

We expect OpEx to be between $14.4 billion and $14.6 billion. We expect OI&E to be around negative $200 million, excluding any potential impact from the mark-to-market of minority investments and our tax-rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.

Suhasini Chandramouli: Thank you, Luca. We ask that you limit yourself to two questions. Operator, may we have the first question, please?

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What To Expect From Apple's Worldwide Developers Conference

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Key Takeaways

• Apple will kick off its Worldwide Developer's Conference (WWDC) on June 10, with investors likely to be watching for announcements related to artificial intelligence (AI).
• The iPhone maker is expected to unveil iOS 18 and may showcase new AI features.
• Analysts anticipate that new iPhones with built-in AI capabilities could fuel an accelerated iPhone upgrade cycle.
• The company could also comment on reports that it is in talks with Google and OpenAI to integrate AI tech into Apple devices.
• Analysts said WWDC could move Apple's stock, but may not be as big of a catalyst as the iPhone 16 announcement expected in the fall.

Apple ( AAPL ) is set to hold its annual Worldwide Developer's Conference (WWDC) keynote on June 10, kicking off the five-day event, with investors likely to be watching for any updates on the company's artificial intelligence (AI) game plan.

New AI Features and iOS 18 Expected

The iPhone maker is expected to unveil its latest operating system, iOS 18, as well as generative AI features built into Apple apps like iMessage, Photos, and Safari.

Apple recently announced a new iPad Pro powered by its latest chip, the M4, which can support running AI applications locally, marking a key milestone in Apple's push into AI. Previously, the company had been relatively  quiet about its AI initiatives  compared to many of  its big tech peers .

Analysts indicated that while they don't expect Apple to unveil the new iPhone 16 until the fall, the company could still reveal some AI-related updates.

"We see more of Apple’s AI announcements occurring in September at the iPhone 16 launch than at WWDC, but see WWDC as directionally positive as well," Bernstein analysts said.

AI-Fueled iPhone Upgrade Cycle

Bank of America analysts indicated they anticipate "upcoming AI enabled phones (IntelliPhones) to drive a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones."

The analysts said they "expect the adoption curve of AI phones to be faster than the adoption of smartphones, 5G," and that "with an installed base of over 4bn smartphones," Apple could have an opportunity for the next upgrade cycle to be a "once in a decade type of event."

Potential AI Partnership

The company could also comment on recent reports of a potential partnership with Microsoft-backed ( MSFT ) OpenAI and Alphabet's ( GOOGL ) Google .

An agreement could license the companies' respective AI models, GPT-4o and Gemini, to integrate the AI tech into Apple software and devices. An AI partnership with OpenAI or Google may also catalyze a major upgrade to Apple's voice assistant Siri.

How AI Announcements Could Affect Apple Stock

Melius Research analysts said that "Apple's stock is gearing up for a run" as the upcoming WWDC could be the most important annual conference "since the launch of the iPhone in 2007."

The analysts said the stock "typically trades up into the event and then sells off," though they noted that "these AI announcements have broken some well-known patterns for other stocks" and could do so for Apple as well.

Melius said "WWDC announcements are likely to drive iPhone units with a higher ASP at some point soon" and could help "secure Apple's high-margin services revenue growth for a long time," adding that is "all that matters for the long-term investor."

Apple shares have gained about 7.5% over the past 12 months and 0.3% since the start of the year, at $193.05 per share as of 2:50 p.m. ET Monday.

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Why Apple Stock Is the One Tech Name Every Investor Should Hold for the Next 10 Years

Now may be the time to consider adding to a position in Apple over the long-term

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• Apple  ( AAPL ) remains a top tech stock long-term investors will want to own and not trade moving forward.
• The company will unveil new AI features for its iOS suite at the Worldwide Developers Conference on June 10. 
• Apple’s future trajectory will largely depend on its ability to innovate, something that’s been called into question recently.

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A very well-known blue chip stock, Apple (NASDAQ: AAPL ) has seemed to be facing some challenges this year. Apple is now fourth in the Chinese smartphone market due to stock struggles and declining sales. The company’s high price attracts some consumers, but global brands still lead.

The thing is, Apple is much more than a smartphone maker. The company has a suite of products and services (high-margin services at that) investors continue to focus on. Apple’s growth has slowed, as evidenced by recent data out of China. However, the company’s upcoming WWDC24 event in June could spur greater interest.

Here’s what I think long-term investors should focus on when it comes to Apple, and why this is a stock I’d hold for the next decade.

iPhone Stabilization

Wedbush’s latest research indicates that Apple’s iPhone demand is stabilizing , based on recent Asia supply chain checks. The firm raised Apple’s stock price target to $275, anticipating a significant AI-driven iPhone 16 upgrade cycle. This stabilization signals a promising future for Apple’s AI integration.

Wedbush’s research suggests Apple’s AI integration could add $30 to $40 per share, leveraging its 2.2 billion iOS devices. Their Taiwan checks showed Apple’s supply chain outperformed expectations in April, possibly due to inventory builds for upcoming Chinese holidays. 

Wedbush expects Apple will establish an AI App Store, boosting Services growth as developers create AI-driven consumer apps.

The AI Opportunity

Apple has been focused on investing in R&D over the long-term. However, since 2019, the company has already spent $100 billion on this line item. Every year, Apple spends $1 billion for AI development and research.

According to Luca Maestri, Apple’s CFO, the company has followed a hybrid investment model. It has collaborated with tons of suppliers to deliver new AI services most cost-effectively.

This strategy enables Apple to enhance AI capabilities without bearing the full expense of building an AI infrastructure alone.

If the company can integrate AI features into its products that resonate with consumers, the market opportunity could be massive. Indeed, Wall Street predicts Apple’s earnings to reach $8.01 per share by fiscal 2026, suggesting 30% upside if the company’s price-earnings ratio remains stable.

These projections might undervalue AI’s impact on iPhone demand, making Apple a potentially undervalued stock. 

Launching AI Practical Functions

Apple Inc. planned to s howcase its AI developments at the WWDC from June 10-14. Bloomberg reported that Apple might reveal Project Greymatter, an AI tool for integration into apps like Safari, Photos, Notes, and operating system functions.

Apple’s new AI features focused on practicality, including “smart recap” to summarize missed notifications and messages for user convenience.

Apple considered incorporating third-party AI features into iPhones, including discussions with Alphabet about integrating Google’s generative AI. Licensing Google’s AI, particularly its Gemini model was seen as a cost-effective strategy for iOS enhancements.

Concurrently, Apple developed its chips for local AI tasks on iPhones, avoiding cloud data transmission. 

Unlike rivals Microsoft and Google, which monetize AI via subscription plans, Apple aims to boost premium iPhone sales with AI advancements in iOS 18, encouraging upgrades and increasing revenue.

Own, Don’t Trade AAPL Stock

Despite its recent underperformance, I think Apple remains a top tech giant that’s worth considering as a portfolio staple over the next decade. Sure, growth has slowed. It’s going to slow when any company gets to Apple’s size (trees don’t grow to the sky).

But with the company’s continuing cash flow and buybacks, there are reasons why investors stand to be rewarded for holding this stock over the very long-term. I do think Apple has what it takes to grow into its current multiple over time.

Investors are clearly willing to pay up for security. If that’s the case, AAPL stock could be poised to outperform over the coming years relative to many of its higher-growth peers.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com  Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/why-apple-stock-is-the-one-tech-name-every-investor-should-hold-for-the-next-10-years/.

©2024 InvestorPlace Media, LLC

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Where Will Apple Stock Be in 1 Year?

T ech stocks have been soaring lately thanks to excitement over new artificial intelligence (AI) technologies. Ever since the launch of OpenAI's ChatGPT in late 2022, businesses have been ramping up spending on GPUs from Nvidia , new data centers, and general infrastructure to harness the power of generative AI and run AI models.

However, one big tech company is increasingly looking left behind. That's Apple (NASDAQ: AAPL) . Unlike peers Microsoft , Alphabet , Amazon, and Meta Platforms , Apple hasn't drawn much attention to its large language models, and it hasn't formed a meaningful AI partnership the way Microsoft has with OpenAI, or, to a lesser extent, Alphabet and Amazon have with Anthropic.

As a result, the stock has underperformed its peers over the past year.

While its peers have soared in the generative AI boom, Apple has been essentially range-bound, and it's trailing the S&P 500 by a significant margin as well.

Can Apple get back on track, or are its best growth days behind it? Let's look at where the company is today and where it will be another year.

Apple's current challenges

Apple stock has grown in recent years, even as revenue has been nearly flat. The company has managed to grow earnings per share by expanding margin through growth in its higher-margin services segment and by buying back stock.

That trend was on display in its most recent quarter, as revenue fell 4% year over year to $90.8 billion. Sales in its product channel were particularly weak, down more than 10% in part because of challenges in China and extending iPhone upgrade cycles as customers delay new purchases.

Earnings per share were flat in the quarter. The lack of growth comes at a time when the rest of the big tech sector is seeing top-line growth reaccelerate coming out of the tech bear market in 2022. Apple, meanwhile, has yet to report meaningful revenue from the Vision Pro, the spatial computing device it released in February, and it hasn't found a way to monetize AI yet.

The company also pulled the plug on its decadelong autonomous vehicle project, known as Project Titan, a setback for the company and for investors hoping that it could have been Apple's next breakthrough product.

What will change for Apple over the next year?

Apple's business a year from now should be driven by the next iteration of the iPhone, the iPhone 16, and potential developments with the Vision Pro and artificial intelligence.

iPhone sales have a history of jumping every few years because of "supercycles" driven by significant upgrades, or pent-up demand. However, there don't seem to be significant signs that a boom in iPhone sales is on the way.

Apple will hold its annual developer conference in June, and we could learn more about developments in AI and other innovations at the presentation. CEO Tim Cook had promised in February to reveal what the company is doing with AI earlier in the year so we could hear more at the World Wide Developer Conference (WWDC).

Considering it's the leading consumer tech device maker, Apple has a whole product portfolio that could be improved with AI, including technologies such as Siri, but most of the company's intentions in AI have been a mystery so far. Investors should expect more clarity on that over the next year.

Is Apple stock a buy?

Apple's most recent earnings report makes it hard to justify the company's price-to-earnings ratio of 30.

Revenue is falling, and the company's primary product categories look mature. That landscape isn't significantly different from where the company was a few years ago, and Apple stock has managed to be a winner growing the services business and raising prices on devices like iPhone. But that doesn't seem like a strategy that can work forever.

Apple may wow investors at the WWDC next month, but assuming that will happen isn't a good enough reason to buy the stock. At its current price, investors can find better stocks to own elsewhere.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .