Analysis Apple FY2025-Q1

Last week, Apple published its FY2025-Q1 results, reporting revenue of $124.3 billion. This is 4% higher than in FY2024-Q1.

Over the past four quarters, iPhone sales have continued to be the company's main revenue driver, accounting for 50.7% of Apple's total revenue. Revenue from services come in second, contributing 25.1% to the total.

These services are becoming increasingly important for Apple: over the past five years, revenue from this segment has grown at a CAGR of 15.6%. Meanwhile, the combined sales of devices have only increased by 6.2% CAGR.

It’s fair to say that the introduction of the iPhone marked the true beginning of Apple’s massive success. However, this success has now leveled off: since early 2022, iPhone revenue has fluctuated around $200 billion TTM.

Apple’s total net sales hover just below $400 billion TTM. In FY2024, it recorded a net profit of $93.7 billion, slightly lower than in FY2023 and FY2022 ($97 billion and $99.8 billion, respectively).

What does the market expect by valuing this company at $3,600 billion?

I personally can’t justify this valuation; the company is trading at 38x its net profit, while barely growing its revenue.

Is the market betting that Apple will become one of the AI winners? Perhaps. Early last year, I wrote about Apple’s opportunities with its hardware ecosystem but also about the implications of Siri and its lag behind other AI developers.

Now, its newly rebranded "Apple Intelligence" has secured a deal with OpenAI for LLM and AI software. A potentially strong combination, but the competition is certainly not asleep.

Even though Apple is a free cash flow machine (delivering $97 billion in FCF -/- SBC in FY2024), I believe the company is currently overpriced.

I will continue watching Apple from the sidelines; perhaps the future will present a good buying opportunity. What do you think? 💬

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The attached image shows Apple's revenue development per segment. While it grew in FY2020 and FY2021, this growth has stagnated over the past three years. 

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