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Apple (AAPL -1.7%) takes a minor hit today after the iPhone maker's Q1 (Dec) revenue growth forecast comes up a tad lighter than expected. Apple projected a low to mid-single digit percentage lift in revs yr/yr for the holiday quarter. The high end of this outlook represents an uptick from the +2.1% growth delivered during the year-ago period. However, the lower bound would mean little improvement over last year's holiday quarter.

Given the buzz around AI, investors are left feeling letdown today by Apple's forecast. CEO Tim Cook did mention during the call that iOS 18.1 adoption, which includes some of the Apple Intelligence, i.e., AI, features unveiled earlier this year, is occurring at twice the rate of iOS 17.1 adoption, underpinning decent interest for Apple Intelligence, which is only available on the latest iPhone 16 lineup and iPhone 15 Pro models. However, without this interest manifesting in robust yr/yr growth during DecQ, unease over macroeconomic and competitive pressures may be creeping forward.

Concerns over sluggish iPhone demand started to brew shortly after the iPhone 16 unveiling in mid-September, when estimated preorders were relatively soft. The problem may not be demand but timing. Apple's decision to release its newest operating system before including all of the features unveiled on stage may be generating upgrade hesitation. This past week, Apple made the first set of AI features available in U.S. English for iPhone, iPad, and Mac users. More features will be released in December. The decision by Apple to ship an unfinished iOS could be eroding DecQ revenue guidance.

Outside of mild guidance, Apple put together another solid quarter, boasting growth across the board.

• iPhone sales reached another Q4 (Sep) record, expanding by 6% yr/yr to $46.2 bln, surpassing street estimates by $1.4 bln. Growth occurred across every geography. Apple continued to express excitement over India, where overall revenue set an all-time record.
• Mac sales crept 2% higher to $7.7 bln, sustaining a consistent low-single-digit improvement from last quarter. Apple released its M4 Macs earlier this week, touting meaningful performance improvements over the prior generation, preparing them for further AI-related enhancements.
• iPad revenue climbed by 8% to $7.0 bln. Given its technological advantage in the tablet market, the iPad remains a magnet that can pull consumers into the Apple ecosystem, generating interest in other Apple products.
• Wearables was a weak point, dropping by 3% to $9.0 bln. The Apple Watch installed base did reach a record high, with over half of customers being new to the product. Like the iPad, the Apple Watch can also act as a way to attract more users to the Apple ecosystem.
• Services was the standout segment in SepQ, setting an all-time revenue record of $25.0 bln, a 12% jump yr/yr. Paid subscriptions grew by double-digits in the quarter, with total subscriptions more than double where Apple was four years ago, reflecting substantial growth since the pandemic.

Bottom line, DecQ revenue guidance was disappointing. However, Apple's SepQ report showcased the steady demand for its expansive portfolio. With additional Apple Intelligence features rolling out over the next few months, iPhone demand may ultimately pick up meaningful steam heading into 2025.