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Apple (AAPL +1%) is trading higher after reporting Q1 (Dec) results last night. The headline numbers were roughly as expected with a nice EPS beat. Revenues rose 4.0% yr/yr to a new DecQ record of $124.3 bln, which was in-line with analyst expectations. On the call Apple said it expects Q2 (Mar) yr/yr revenue growth in the low-to-mid single digits (FactSet consensus +5.3%).

• iPhone sales were below street estimates but investors do not seem overly concerned. Revenue declined 0.8% yr/yr to $69.14 bln vs $71 bln street ests. The iPhone active installed base grew to an all-time high in every geography. Apple also set an all-time record for upgraders. Apple said that its iPhone 16 lineup takes the smartphone experience to the next level and Apple Intelligence is one of many reasons why customers are upgraded.
• Mac sales for the holiday quarter rose 15.5% yr/yr to $8.99 bln, driven by significant excitement around the world. Apple saw strength across its lineup, from the new Mac mini to the latest MacBook Air and MacBook Pro models. Apple saw double-digit growth in every geographic segment. The Mac installed base reached an all-time high and Apple saw double-digit growth for both upgraders and customers new to the Mac.
• iPad revenue jumped 15.2% yr/yr to $8.09 bln, driven by strong interest for its latest products, including the new iPad mini and latest iPad Air. The iPad installed base reached another all-time high and over half of customers who purchased an iPad during DecQ were new to the product.
• Wearables revenue was down 1.7% yr/yr at $11.75 bln, a bit light of street estimates. Customers are excited about the new AirPods 4, however, its Apple Watch was lapping a difficult compare against the Watch Ultra 2 launched last year. Nevertheless, the Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during DecQ being new to the product.
• Services revenue rose a healthy 13.9% yr/yr to an all-time record of $26.34 bln, a bit above street estimates. Both transacting and paid accounts reached new all-time highs. Paid subscriptions also grew double-digits. Apple now has well over 1 bln paid subscriptions across the Services on its platform.
• A notable weak spot in DecQ was Greater China as it was the only geography with a yr/yr sales decline (-11% yr/yr to $18.5 bln). Apple noted that over half the decline was driven by change in channel inventory from the beginning to the end of the quarter. Also, Apple has not rolled out Apple Intelligence in China, which likely softened iPhone 16 sales. China is also a competitive market and the macro picture there is not great.

Overall, investors are pleased with Apple's start to FY25. iPhone sales missed the mark a bit, but it sounds like China is a big reason for that and investors likely already priced in a weak China. They seem relieved it was not worse. Also, we think investors are pleased with the low-to-mid single digit sales growth guidance for MarQ. Apple noted on the call that the dollar has strengthened significantly and it expects a FX headwind of 2.5 percentage points in MarQ, so this guidance is quite good given the FX headwind.