Apple Rakes In Record iPhone And Services Revenue Hand Over Fist, Investors Still Balk

Apple Store with glass entrance and people inside.
Apple posted financial results for its fiscal 2023 fourth quarter (for the period ending September 30, 2023), with CEO Tim Cook boasting an all-time high in Services revenue and a quarterly high in iPhone sales. Along with its other product offerings, Apple generated a cool $89.5 billion for the quarter, resulting in a profit of $22.96 billion for the quarter. Not too shabby, though investors don't seem particularly impressed—Apple's stock dipped over 3% in extended trading hours, and it's trending down in early morning trading hours.

Part of the reason could be that Apple's total sales actual slid for the fourth consecutive quarter. And compared to the same quarter a year ago, Apple's revenue is down from $90.15 billion. On the flip side, Apple still beat Wall Street's expectations for the quarter, with earnings per share checking in at $1.46 (versus an expected $1.39 EPS).

"Today Apple is pleased to report a September quarter revenue record for iPhone and an all-time revenue record in Services," Cook said in a prepared statement. "We now have our strongest lineup of products ever heading into the holiday season, including the iPhone 15 lineup and our first carbon neutral Apple Watch models, a major milestone in our efforts to make all Apple products carbon neutral by 2030."

In addition, Apple's active install base of devices notched another all-time high across all products and geographic locations, CFO Luca Maestri added. Maestri credited the achievement to the strength of Apple's ecosystem and "unparalleled customer loyalty."

It remains to be seen how loyal some of Apple's customers will be on the heels of hitting a high in Services revenue. Last quarter's figures came ahead of a round of price hikes across several Apple services, including Apple TV+, which jumping 43% from $6.99 per month to $9.99 per month for both new and existing subscribers. Same goes for the annual plan, which increased from $69 to $99. Apple Arcade, Apple News+, and every tier of the Apple One bundle also recently saw price hikes.

Apple is banking on customer loyalty continuing to drive record revenue. It should also be noted that Apple is far from alone in raising streaming and other subscription prices.

Chart of Apple's net sales for its fiscal Q4 of 2023.

As for the iPhone, it remains Apple's biggest hardware item. The iPhone also ranked as the only hardware category that grew its revenue compared to the same quarter a year ago, going from $42.6 billion in fiscal Q4 2022 to $43.8 billion in fiscal Q4 2023. Mac, iPad, and wearable sales all declined, with the Mac taking the biggest hit, dropping from $11.5 billion to $7.6 billion in the same time frame.

That's a 34% year-over-year decline, which Cook attributed to "challenging market conditions" and "supply disruptions" when discussing the results in an earnings call. However, he doesn't seem concerned that the downward trend will continue. Just the opposite, Cook anticipates "significant acceleration in the Mac space" next quarter, driving by its new M3-powered Mac systems.

"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," Cook added.

Apple refrained from offering any specific guidance, though Maestri did say that the company expects its December quarter revenue "to be similar to last year." The soft outlook is likely the other reason why Apple's stock is down in extended and early morning trading hours following its latest earnings report.