Quick Read
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Apple closed its best fiscal year with Q4 revenue of $114 billion, up 12%, driven entirely by iPhone and Mac hardware rather than AI.
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Apple trades at a P/E of 44 versus Microsoft's 27 and Alphabet's 14, pricing in an AI payoff that has not arrived yet.
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Mark Gurman warned that as users shift to ChatGPT and Gemini for search, Apple's Google revenue-share in Safari could shrink Services revenue.
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Apple( NASDAQ:AAPL ) just finished its best fiscal year ever. One of the sharpest lines about the most recent quarter came from someone who was supporting it. On CNBC's Fast Money on Nov. 2, Dan Nathan said:
Apple really has been delivering on the top line. They've gotten zero out of Siri, they've gotten zero out of AI. There's been no AI pull forward from the hardware. It's just time for a better phone.
So, even a skeptic of Apple's AI story agrees that the hardware cycle is working. Apple reported fiscal Q4 revenue of $114.48 billion, up 11.72% year over year. Earnings per share (EPS) came in at $2.10 against a $1.98 consensus, and full-year revenue reached $478.83 billion.
iPhone and Mac Demand Drive the Bull Case
On Mad Money , Jim Cramer said, "Apple delivered a record September quarter to cap off a record year with a top and bottom line beat driven by strong iPhone and Mac sales."
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He also praised what he called "excellent sales performance in China." iPhone revenue rose to $57.58 billion from $49.02 billion. On Fast Money , Deepwater Asset Management's Gene Munster pointed out that "Mac was up 24%. The Street was looking for up 15%." Munster said he sees a three-year hardware upgrade cycle as buyers get their Macs ready for AI. He also expressed concern that CEO John Ternus gave no clear answers on personalized AI agents.
Siri AI Still Trails ChatGPT and Gemini
On Bloomberg Businessweek , Bloomberg's Mark Gurman described a weekend spent with OpenAI's ChatGPT: "Apple has nothing close. It's a game changer. It's literally like an all-day assistant... And Siri AI is operating nowhere close."
Gurman was also fair to Apple, calling Siri AI "fantastic" for 90% of use cases. On the earnings call, Ternus said, "Siri right now is primarily request-based" and runs on an architecture Apple can expand over time.
Rivals are already making money from AI. At Microsoft( NASDAQ:MSFT ), Azure revenue grew 48% to $33.165 billion, and Microsoft 365 Copilot passed 30 million paid seats. Alphabet( NASDAQ:GOOGL ) said Google Cloud revenue grew 103% and its Gemini app reached one billion users. Gurman noted a risk to Apple's Services business: a significant portion of that revenue comes from Google's search revenue-sharing agreement in Safari. He warned that "as people move to the Gemini app, as people move towards the ChatGPT app... or even Siri AI to get things done that they normally would do in a search engine, that services revenue is going to come down."
China Results Split the Bulls and Bears
On Bloomberg Businessweek , Carol Massar reported that Greater China revenue of $17.54 billion missed the Street estimate of $18.75 billion. Cramer and Massar measured the same number against different benchmarks. Cramer compared it with last year, when the region brought in $14.49 billion, and Apple called the result up 21%, a quarterly record. Massar compared it with what analysts expected, and the result fell short. China is growing, just more slowly than Wall Street had projected.
What Apple Has to Prove Before the AI Gap Matters
So far, Apple's results have held up despite the AI gap, though AI apps eating into search could change that. Apple guided for December-quarter Services growth of 8% to 9% and gross margin of 45% to 46%. That margin outlook includes the cost of ramping up Siri AI. The stock closed most recently at $338.82, down 1.5% for the past week but still up 24.8% year to date. Apple trades at a P/E of 44, compared with 27 for Microsoft and 14 for Alphabet. At that premium, investors are counting on Apple to make money from AI eventually.
Three things to watch:
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Whether Siri AI moves beyond beta and Apple can sell paid server-side levels
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Whether Services growth holds as search shifts to AI
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Whether China starts beating estimates as well as last year's numbers
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