Apple’s revenues in Q2 2024 (fiscal Q3 2024) returned to growth with 5% YoY gains. The revenue growth was driven by both product and services segments. The product segments collectively grew 2% YoY, rebounding from a 10% YoY decline in Q1 2024. While the services segment continued its double-digit YoY growth (14%) for the fourth consecutive quarter, and continued to account for over one fourth of Apple’s revenue for the second consecutive quarter. The growth helped Apple’s Services revenue reach its highest ever share (28%) within Apple’s total revenues.

Commenting on the results, Varun Mishra, Senior Analyst at Counterpoint noted, “Despite iPhone revenues declining slightly year on year, there are positives within several key categories, as overall hardware and services both drive growth. iPad and Mac both showed year over year growth. While within iPhones, the favourable product mix towards Pro series continue to drive ASPs. iPad and Mac are benefiting from refreshed product lines. However, the Wearables, Home and Accessories segment continue to decline for the fourth consecutive quarter, thanks to rising competition in the smartwatch segment and a lack of refresh in the AirPods portfolio. However, important launches across hardware categories are expected in H2 2024 which can help the segment back to a positive trajectory.”

On services, Tarun Pathak, Director at Counterpoint Research noted, “Services, unsurprisingly, have delivered yet another quarter of growth. Further, Apple now has entered the GenAI era with a strong statement, and a great demonstration earlier this year at WWDC. The rising tension of Apple being late to the GenAI race has been released, however, executing its AI strategy across regions will be difficult, and there will be scrutiny on where Apple Intelligence can deliver real value. If Apple is able to key-in to strong use cases, Apple Intelligence will open new arenas for monetization, likely giving a push to an already strong flywheel of services revenue; a positive for the long term.”

Apple Revenues by Product Categories

Source: Counterpoint Research Apple 360

Segment Analysis:

• iPhone revenue declined 1% YoY, despite shipments remaining flat. On the positive side, the share of Pro series within Apple’s total sales reached 47% during the quarter. Apple also saw an improvement in sales in China during the 618-shopping festival where it offered attractive discounts. China remains a key region for Apple.
• iPad returns to growth (24% YoY) after five consecutive quarters of revenue decline.
  • Apple did not refresh its iPad portfolio in 2023, so the newly refreshed Pro and the Air series have breathed new life into iPad sales. The positive initial response for Pro model has been favourable for ASPs.
  • The base and mini version is due for refresh and can continue to drive growth in H2 2024.
• Mac also grew (2% YoY) for third consecutive quarter and was the second fastest growing product segment for Apple. This was the first full quarter of sales for the new M3-powered MacBook Air, which helped drive growth.
• Wearables, Home and Accessories revenue declined 2% YoY. This was the fourth consecutive quarter of decline. The key segments, Watch and AirPods both continued to decline. While this is a seasonally low quarter for Watch, Apple is also facing tough competition in the segment.
  • While the Apple WatchOS dominates the advanced smartwatch segment, there is growing adoption of HarmonyOS and WearOS platforms in 2024. More here
  • Meanwhile, AirPods are due for refresh amid tough competition from low cost but decent quality products.
• Services continued to soar reaching yet another record share milestone within Apple’s total revenue. The segment still has room for growth and is on a path to become a $100B per year segment in 2025. Apple will also seek to monetize Apple Intelligence in the future, which can further drive growth.