Let’s talk about monster quarters. Apple delivered an impressive September quarter on Thursday night, even as iPhone supply was constrained by strong demand. The company’s positive outlook for the holiday quarter has led to a real rally in stock prices. Apple’s revenue for the fourth quarter of its fiscal year 2025, which ended Sept. 27, rose 8% year over year to $102.47 billion, beating the LSEG consensus estimate of $102.26 billion. LSEG said earnings per share were $1.85, up 91% (13% excluding one-time charges in the year-ago period) and beating consensus estimates of $1.77. AAPL YTD Mountain Apple YTD stock jumped 5% in after-hours trading, rising to about $285 before falling to about $278. The company’s stock, which got off to a dismal start to 2025, is up about 30% in the past three months as of Thursday’s close. It’s up more than 8% for the year and joined the $4 trillion market cap club earlier this week. Highlights In addition to record sales revenue and operating cash flow in the September quarter, our high-margin services sector set all-time revenue records in all regions. Overall, Apple set records for the September quarter in every region except Greater China: the Americas, Europe, Japan, and the rest of Asia-Pacific. Sales in Greater China decreased in the quarter, much of which was due to iPhone supply constraints. In a post-earnings conference call, CEO Tim Cook said he expects the region to return to growth this quarter. Apple’s consolidated gross profit margin also expanded 70 basis points sequentially and nearly 100 basis points (1 percentage point) year-over-year, above the high end of management’s prior guidance, thanks to a strong sales mix despite a $1.1 billion tariff-related cost headwind. Why We Own It Apple’s dominant hardware and growing services business offers a deep competitive moat and many bundling opportunities. Management’s net cash neutral strategy provides confidence that free cash flow will continue to fund dividends and share repurchases. Competitors: Samsung, Xiaomi, OPPO, Dell, HP Inc. Last purchase date: April 8, 2014, Purchase start date: December 2, 2013 iPhone sales rose 6% to $49.03 billion, falling short of expectations. However, Cook pointed out that demand is so strong that this is due to a lack of supply for some iPhone 16 models and the new iPhone 17 models. Perhaps most importantly, management guided the company to significantly exceed expectations for its current quarter (Q1 2026), with Cook saying on the post-earnings conference call that the December quarter will be a “highest ever for the company and for iPhone.” It’s clear that there’s a huge demand for the iPhone 17. And our large installed base of active devices, which is actually at an all-time high, is driving the service’s continued growth. Given the momentum of the iPhone and management’s reassurance that a new, smarter artificial intelligence, Siri, will debut in 2026, we continue to believe the best thing our members can do with Apple stock is to “own it, not trade it.” Therefore, we raise our price target from $240 to $300. However, we maintain our 2 rating as we wait for the stock to reach better levels and revert the stock to a 1 rating, which equates to Buy. Product Highlights Product revenue achieved a record in the September quarter, driven by growth in iPhone and Mac. Product sales rose more than 5% to $73.72 billion, but fell short of expectations. Apple’s active device installed base also reached an all-time high. The device set records for the September quarter in Latin America, the Middle East, and South Asia, making it the iPhone’s September quarter record despite supply constraints. iPhone sales hit an all-time high in India. This was the highest active install base ever for iPhone and the highest for upgraders in the September quarter. Mac sales increased in all geographic segments, driven by strong MacBook Air performance, with CFO Kevan Parekh noting strong double-digit growth in emerging markets. The Mac installed base also hit an all-time high, with nearly half of all buyers using the product line for the first time. Mac sales increased 12.7% to $8.73 billion in the quarter. The iPad installed base also hit a new high. September quarter record of upgrade users where more than half of purchasers are new to the product. iPad sales were flat at $6.95 billion. Sales in the Wearables, Home & Accessories segment were down slightly to $9.01 billion, but still better than expected. These were driven by growth in the Apple Watch and AirPods, both of which reached all-time highs in installed base. Apple Watch upgraders also set a new record for the September quarter. Services Segment Highlights Services Segment’s highest revenue ever – grew 15% to $28.75 billion in the September quarter. All-time revenue records were achieved for advertising, the App Store, cloud services, music, payment services, and video. Both trading and paid accounts hit record highs. Outlook Apple does not provide official guidance. However, we did get some interesting comments regarding this quarter. As Mr. Parekh pointed out on the conference call, this outlook assumes no change in global tariff rates or policies, and no change in the deteriorating macroeconomic outlook. LSEG said December quarter revenue is expected to rise 10% to 12% year over year, well above the 6% the Street had expected. If achieved, it would be a record quarter for the company. iPhone sales are expected to grow by double digits year over year, which would also give Apple its best quarterly iPhone performance ever. Mac sales are expected to be difficult to compare year over year, given the launch of the M4 MacBook Pro, Mac Mini, and iMac in the same period last year. Services revenue is expected to grow year over year, similar to what Apple reported for all of fiscal 2025, at about 13.5%, faster than the Street had expected about 12%, according to FactSet. Gross profit margin for the December quarter is expected to be 47% to 48%, above interim expectations despite headwinds from tariff-related costs estimated at $1.4 billion. Operating expenses are expected to be $18.1 billion to $18.5 billion, higher than expected. However, we believe this is acceptable as Apple is increasing its investment in artificial intelligence. Capital Allocation Apple ended the September quarter with $132 billion in cash and securities. Net cash excluding debt was $34 billion. During the quarter, Apple returned $24 billion to shareholders, including $3.9 billion in dividends and $20 billion in share buybacks. (Jim Cramer’s Charitable Trust is long AAPL. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
