Apple's Q2 2024 earnings report, released on Thursday, contains five fascinating details, including hints about an upcoming product announcement, Apple's plans for AI, an eye-opening trend in Macbook sales, and what to expect at WWDC 2024.
A rocky quarter at Apple leading up to Q2 earnings call
The first half of Apple's financial year has been busy. There have been a slew of legal and sales matters, alongside a long-awaited product launch.
During February's Q1 earnings call, Apple CEO Tim Cook hinted at AI projects in the works, which we may soon see come to fruition at WWDC 2024 in June. Cook also praised the Apple Vision Pro during that February 1 earnings call. The device sold out in 18 minutes when it was released the next day.
The Apple CEO forecasted during that Q1 call that "[Apple] will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year."
The Q2 earnings report is the first quarter of sales data for Apple's first headset. Two big Apple events are also right around the corner, including the virtual "Let Loose" event on May 7 and WWDC 2024 starting on June 10.
In addition to upcoming events and a critical new product launch, Apple has also been grappling with regulatory troubles in the EU and a groundbreaking anti-trust lawsuit in the US.
So, the stakes were high on Thursday when Apple kicked off its Q2 earnings call. There were a few key takeaways laptop and Mac users should know about.
1. An "exciting product announcement" is coming next week
One of the most eye-catching takeaways from Thursday's earnings report and investor call was Cook's hint at an "exciting product announcement" coming next week. The news dropped Thursday night in a press release from Apple. While Cook didn't say when exactly the announcement will be, it's a very safe bet he was referring to the upcoming "Let Loose" event slated for May 7, Tuesday of next week.
That event is expected to spotlight the iPad and Apple Pencil. Leading Apple analyst Mark Gurman of Bloomberg has reported the event may include a redesigned Apple pencil featuring haptic feedback and squeeze-activated controls. This product would replace the current premium Apple Pencil that debuted in 2018.
In addition to a new Apple Pencil, Cook may also be referring to a new iPad reveal. The most likely candidate is the long-awaited OLED iPad Pro. An OLED display would make the already great iPad Pro unstoppable in the tablet market, particularly for graphic designers and artists.
2. Apple is doubling down on AI
We believe in the transformative power and promise of AI and we believe we have advantages that will differentiate us in this new era
Apple CEO Tim Cook
It's no secret Apple has been hard at work on AI projects for its ecosystem, which is not surprising considering how AI is booming for other tech giants like Microsoft and Meta.
Nearly half of the investor call following the release of Apple's Q2 2024 earnings report focused on questions about AI. While it seemed like Cook wanted to save most of his AI reveals for WWDC 2024, it is clear that AI is a top priority for Apple this year.
During a call with investment analysts, Cook commented on the company's focus on AI: "We believe in the transformative power and promise of AI and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software, and services integration, groundbreaking Apple silicon with our industry-leading neural engines, and our unwavering focus on privacy."
While that's a fairly broad description of Apple's hopes for AI, we do have a few hints about where we might see it appear first. The most likely candidate is iOS 18. Rumors have been circulating for months now surrounding a slew of new AI features coming to iOS 18, which is already being billed as one of the biggest iOS updates yet.
Potential AI features include a vastly improved version of Siri, a browser assistant in Safari, and app integrations for Apple Music, iMessage, Pages, and more. Many of those same features will likely be included in iPadOS 18, as well.
3. The Apple Vision Pro is not boosting "Wearables" sales
Cook praised the Apple Vision Pro in the press release and investor call following Apple's Q2 2024 earnings report. However, Cook's enthusiasm for the ambitious new headset might not have translated into solid sales.
The Vision Pro launched on February 2, 2024, just after Apple's Q1 2024 earnings report was released, and the Q2 reporting period ended on March 30, including under two months of Vision Pro sales.
The Vision Pro has no category in the earnings report, so it was likely lumped into the "Wearables, Home and Accessories" category. Unfortunately for Apple, this category saw a decline in sales for the quarter compared to Q2 2023. Sales reported for the "Wearables" category in Q2 2024 totaled $7.91 billion compared to $8.75 billion during the same quarter last year.
While this earnings report only includes the first couple of months of Vision Pro sales, this significant decline could indicate that Apple's pricey headset wasn't an immediate hit in terms of profit.
It could simply be that people have waited until the Vision Pro has more apps or reviews before buying one. However, from a sheer numbers standpoint, this is a disappointing result for the Vision Pro.
4. iPhone sales are down, Mac sales are up
Perhaps the most striking sales data in Apple's Q2 2024 earnings report is a significant dip in iPhone sales year-over-year. In Q2 2023, Apple reported $51.3 billion, while in Q2 2024, it reported just $45.9 billion. That's a $5 billion decrease in iPhone sales, which could be alarming initially. However, that dip can mean many things, and luckily, it was balanced out by a notable increase in Macbook sales. These two data points paint a picture of where Apple is now.
Despite an overall 4 percent revenue drop, Apple's installed user base across all product and geographic segments reached a new all-time high this quarter. So, a drop in iPhone sales doesn't necessarily mean people are leaving the iPhone behind. It's more likely that a growing number of iPhone users are simply waiting to upgrade their iPhone.
On the other end of the spectrum, a significant number of people are switching to a Macbook or upgrading their existing Mac. In Thursday's investor call, Cook even noted that 50% of new Macbook buyers this quarter were new to Mac, meaning they were switching from another brand's laptops.
Looking at these two seemingly opposite trends side-by-side, one big difference stands out. Apple's Macbooks have seen bigger performance jumps between generations compared to its iPhones. The last few iPhones have been so good and so expensive that upgrading often isn't worth it unless you have a model from several years ago.
In contrast, the M3 MacBook Air offers significantly stronger performance than the M1 Macs or even the M2 line-up. Apple's Senior vice president and CFO, Luca Maestri, even commented in the investor call that the increase in Mac sales was "driven by the strength of our new MacBook Air, powered by the M3 chip."
With that in mind, the dip in iPhone sales alongside an increase in Mac sales makes sense. How Apple will attempt to get iPhone sales back up over the next few months is still up in the air. We'll have to wait and see.
5. WWDC 2024 will be critical for Apple's Q3 and Q4
The overarching theme of Apple's Q2 2024 earnings report is the critical importance of WWDC 2024. Not only is it one of Apple's most significant events of the year, it will likely include the launch of Apple's first wave of long-awaited AI features.
The "Let Loose" iPad event a month before WWDC may help drum up excitement for Apple's new products and OS updates, but WWDC itself will be the actual test. Apple is staking a lot on its new AI tools, so its success over Q3 and Q4 could hinge on whether those features connect with users.
Even if you're not planning to attend WWDC or watch along live, there are a couple of things to keep an eye out for. The first is iOS 18. Rumors and leaks circulating over the past several months indicate that the iPhone will get the first taste of Apple's AI advancements. Siri, in particular, is due for an overhaul, so it will be exciting to see how well Apple integrates large-language AI into its virtual assistant.
iPadOS 18 is also expected to get many of the same AI updates coming to the iPhone. Apple will likely unveil both OS updates at WWDC 2024 and roll out to users sometime in the fall.
Laptop and Mac users should also watch out for announcements about the MacOS 15. Apple's Mac line-up performed well this quarter, so an OS update could either strengthen that growth or stunt it. It's unclear how much Apple plans to integrate AI into macOS 15, although rumors hint that it will include improved accessibility features.
