Prep the pan and bread: Grease a 9x13-inch baking dish with butter or nonstick spray.
Spread the bread cubes on a baking sheet and let them sit out for 30–60 minutes to dry slightly, or toast them in a 300°F (150°C) oven for 10–12 minutes until just dry, not browned.
Cook the apples: In a large skillet, melt the butter over medium heat. Add the diced apples, brown sugar, cinnamon, nutmeg (if using), and salt. Cook for 6–8 minutes, stirring, until the apples are slightly tender and glossy.
Remove from heat and cool for a few minutes.
Make the custard: In a large bowl, whisk the eggs, milk, cream, and vanilla until smooth. Set aside.
Make the cream cheese filling: In a medium bowl, beat the softened cream cheese with the powdered sugar until smooth and spreadable.
Assemble the first layer: Add half of the bread cubes to the prepared baking dish. Spoon half of the cooked apples over the bread.
Drizzle 1/4–1/3 cup caramel sauce over the apples.
Spread the cream cheese: Dollop the cream cheese mixture across the apples and gently spread it into an even layer. It doesn’t need to be perfect—pockets are fine.
Finish the layers: Top with the remaining bread and apples. If using nuts, scatter them over the top.
Drizzle another 1/4–1/3 cup caramel sauce across the surface.
Add the custard: Slowly pour the egg mixture over the casserole, pressing the top gently with a spatula to help the bread absorb the custard. Cover tightly with foil.
Rest (quick or overnight): For best results, refrigerate for at least 30 minutes and up to overnight. The longer it rests, the creamier the center.
Bake covered: Preheat the oven to 350°F (175°C).
Bake the covered casserole for 30 minutes.
Bake uncovered: Remove the foil and bake another 20–30 minutes, until the top is golden and the center is set but still slightly soft. A knife inserted near the center should come out mostly clean.
Finish and serve: Let it rest for 10 minutes to set. Warm extra caramel sauce and drizzle over the top.
Serve with whipped cream or a splash of maple syrup.
