Luca Maestri
Senior Vice President and Chief Financial Officer at Apple
Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis, and in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call.
Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products.
The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare.
Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially and services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin.
Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past, as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88 and we generated very strong operating cash flow of $34 billion.
Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 4 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets in particular, the installed base grew double digits and we had record levels of switchers in India and in Mexico.
Our customers continue to love their experience with our products, with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family.
Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were three key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research.
IPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by two key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product.
Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record, thanks to the largest number of customers new to a smartwatch that we have ever had in a given quarter. In fact, nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product.
Moving to Services, we generated $20.8 billion in revenue, a new all-time record in total and for many services offerings in spite of a difficult foreign exchange environment and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew services revenue double digits on top of growing 24% during the December quarter a year ago.
We remain focused on the large long-term opportunity in this category and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record.
Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4 times what we had just five years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions and we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season.
Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam.
Turning to the enterprise market, we are seeing continued adoption of our services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars, Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process.
Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter and we maintain our goal of becoming net cash neutral over time.
As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter.
In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of 5 percentage points.
For services, we expect revenue to grow year-over-year, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds.
We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between USD13.7 billion and USD13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%.
Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023 to shareholders of record as of February 13, 2023.
With that, let's open the call to questions.
