Apple (AAPL -0.82%) delivered what should objectively be viewed as a solid performance with its fiscal 2023 fourth-quarter results reported on Thursday. The tech giant beat analysts' estimates on both the top and bottom lines. So were those analysts happy? Nope.
There were two main complaints. First, Apple's total revenue declined for the fourth quarter in a row. Second, CFO Luca Maestri hinted that the company might not return to growth in the next quarter as analysts expected.
Wall Street appears to be hating on Apple to some extent after its latest quarterly update. Here are five reasons I'm not.
1. Strongest September quarter for iPhone ever
The general rule of thumb is that as the iPhone goes, so goes Apple. After all, iPhones generate more than half of the company's total net sales.
You probably wouldn't know it from Apple stock's drop on Friday, but the September quarter was the strongest ever for iPhone sales. Apple recorded $43.8 billion in iPhone sales in its fiscal Q4, up nearly 3% year over year.
2. Services business is booming
It wasn't just iPhone sales hitting a record high. The company's services business also set an all-time revenue record in the September quarter. Even more impressive, Apple CEO Tim Cook stated in the quarterly conference call, "Every main service hit a record." Those main services include the App Store, iCloud, Apple Music, and Apple Pay.
Total services revenue jumped more than 16% year over year to $22.3 billion. The consensus among analysts surveyed by LSEG (formerly Refinitiv) was that Apple would record services revenue of just under $21.3 billion.
3. Installed base at an all-time high
There's a good reason to be optimistic that Apple's services growth will continue its strong momentum. Why? The company's active installed base of devices reached an all-time high as well.
Maestri said in the press release announcing the latest results that this achievement is "thanks to the strength of our ecosystem and unparalleled customer loyalty." I think he's exactly right. And the more Apple devices being used, the more that customers will spend on services.
4. Improving margins
One thing that I like more than an attractive margin is an attractive margin that's growing. That's exactly what Apple delivered in its fiscal Q4.
The company's gross margin in its latest quarter was 45.2%. This result was better than the 44.5% expected by analysts and reflected an increase from a gross margin of 42.3% in the prior-year period.
What about net profit margin? It looked great, too. Apple reported a net profit margin in fiscal Q4 of 25.6%, up from 22.9% in the same quarter of fiscal 2023.
5. Next quarter could be better than analysts think
I also suspect that next quarter could be better than analysts think. Sure, Maestri commented that Apple looks for its revenue in the December quarter to "be similar to" the level from last year. But there are a few things to note.
Importantly, the coming quarter will have one fewer week than last year's fiscal Q1 did. Cook said in an interview with CNBC that in the September quarter, the new iPhone 15 outperformed sales for the iPhone 14 in the prior-year period. That's encouraging for the upcoming quarter.
Cook also expressed his opinion that the Mac "is going to have a significantly better quarter in the December quarter." The new M3 chips powering Macs are likely to provide a nice boost in sales despite what Cook referred to as a "challenging" PC market.
162 billion other reasons
There are roughly 162 billion other reasons why I still like Apple. I'm referring to the company's cash stockpile of a little over $162 billion at the end of September. That's a staggering amount of cash, cash equivalents, and marketable securities, especially considering that Apple returned nearly $25 billion to shareholders in its latest quarter through dividends and stock buybacks.
Maybe the negative reactions to Apple's latest update will push the stock even lower. That would give the company a great opportunity to use some of its cash for additional share repurchases. If you believe in Apple's long-term prospects as I do, that would be money well spent. In my opinion, Wall Street hating on Apple right now could be great news for long-term investors.
