Apple’s Q3: Services, iPhone, loyalty assistance company (narrowly) beat estimates

Apple announced late Thursday After the last new quarter record in Juneconfirming strong demand for iPhones, noting the services revenue record while acknowledging that it cannot produce enough Macs or iPads to meet demand.

The company reported record revenue of $83 billion for the period, up 2% year over year. Quarterly earnings per diluted share were $1.20 at the end of the year Analysts’ consensus of $82.81 billion.

Go ahead, Apple Still on track to keep spending moneyEven with the global economic slowdown. “We believe in investing during an economic downturn,” said Apple CEO Tim Cook. “But we are being extra careful in doing so out of appreciation for the environment.”
And stressed that when Recruitment may slow downThe company continues to grow.

Apple has become a service company

Prior to the announcement, Constellation Research analyst Ray Wang told me: “All eyes are on Apple’s service revenue. It’s not about more iPhones being sold, it’s about how much revenue Apple can generate per user.”

This is an important consideration, given that we all expect product demand to slow as economic headwinds persist. How successful is Apple in monetizing its existing customers? The data indicates well.

The services segment posted record revenue in the June quarter of $19.6 billion, up 12% — even as product-related revenue fell to just under $600 million year-over-year. Interestingly, the cost of services sales ($5.5 billion on net sales of $19.6 billion) means the sector now contributes more revenue per dollar than Apple devices now provide.

“The record level of performance for our services portfolio during the June quarter reflects the strength of our ecosystem on many fronts,” said CFO Luca Maestri, speaking to analysts after the earnings announcement. He said, “First, our installed base continued to grow, reaching an all-time high across every major geographic segment and product category. We also saw increased customer engagement with our services during the quarter.”

I think most Apple watchers should take into account the company’s revelation that it now has more than 860 million paid subscriptions across services on its platforms, an increase of more than 160 million over the past 12 months. There is clearly The opposite of what Apple does.

Speaking before Apple’s announcement, Forrester Research analyst Julie Ask pointed out some of the advantages Apple has when providing services to its users. She shared data showing that 18% of Apple owners only own the company’s products and are likely to have a high family income, providing an additional bulwark against disruption.

Cook also said the company remains willing to make strategic investments in other companies that may benefit its business.

What about the iPhone?

Apple is no longer breaking down sales numbers for its iconic iPhone, but it has claimed that the iPhone’s active install base has reached a new all-time high across all geographies. “We set a record for the June quarter for both revenue and transfers to the iPhone,” Cook said.

Later, during the financial call with analysts, he admitted that iPhone sales did not appear to be affected by the broader economic situation: “On the iPhone, there was no clear evidence of a macroeconomic impact during the June quarter,” Cook said.

iPhone revenue grew 3% (y/y) to $40.7 billion in the June quarter – despite foreign currency headwinds. Cook also claimed that Apple attracted a “record number of creators” for the quarter, citing “strong double-digit growth annually.”

Looking ahead, the CEO seemed to receive an optimistic note. “5G has been accelerating,” he said. “5G penetration – especially if you look at it globally – is still very low. In some areas it is obviously higher, but the penetration around the world is still low. So, I think there is reason to be optimistic.”

Supply Chain Challenges for Mac and iPad

Cook confirmed the continued supply restrictions for iPad and Mac, but suggested that while deliveries may be delayed, Interest in both products remains strong.

The company said the Apple Mac business generated $7.4 billion despite supply constraints and negative impacts. “We remain excited about our long-term opportunity with Mac and redefine the PC experience through our relentless innovations,” Maestri said. high during the June quarter. Nearly half of the customers who bought a Mac were new to the product.”

The company said iPad revenue came in at $7.2 billion, down 2% year-on-year, and blamed the decline on supply restrictions and foreign exchange anomalies.

The company confirmed that customer response remains strong, and said the iPad’s installed base has reached a new all-time high, with more than half of customers buying an Apple tablet being new to the tablet.

What about the Apple Watch?

Apple was valued at $8.1 billion in the wearable, home, and accessories segment – down 7.9%. Cook acknowledged that this category appears to be more affected by broader macroeconomic challenges than the rest of the company’s business.

However, there was a little bit of good news. “The Apple Watch continues to expand its reach, as more than two-thirds of customers who purchase an Apple Watch during this quarter were new to the product,” Maestri said.

What Apple said

“The record results for the quarter speak to Apple’s continued efforts to innovate, develop new capabilities, and enrich the lives of our customers,” Cook said in a statement. “As always, we drive our values, and we express them in everything we build, from new features designed to protect user privacy and security, to tools that enhance accessibility, which are part of our longstanding commitment to creating products for everyone.”

“Our June quarter results continue to demonstrate our ability to run our business effectively despite the challenging operating environment,” said Luca Maestri, Apple’s chief financial officer. “During the quarter, we generated approximately $23 billion in operating cash flow, wanted more than $28 billion to our shareholders, and continued to invest in our long-term growth plans.”

Random snapshots of the quarter…

  • iPhone and services achieved record revenue for the June quarter.
  • The active installed hardware base has reached an all-time high for all major product categories.
  • Strong growth in Brazil, Indonesia, Vietnam and India where business almost doubled.
  • Customer satisfaction and loyalty are at an all-time high for all major Apple product categories across all geographies.
  • Nearly half of the customers who bought a Mac were new Apple users.
  • While Apple’s business in Russia clearly suffered, Apple claimed to set June quarter revenue records in both developed and emerging markets, setting all records in several countries, including the United States, Mexico, Brazil, Korea and India.
  • Bank of America issues iPhones to all of its financial advisors.
  • Apple’s spending on research and development continued to rise, reaching $6.797 billion in the quarter, up from $5.717 billion in the 2021 period. Apple spent $19.49 billion on research and development over the past nine months, up from $16.142 billion in the same period in the year Past.
  • The company has seen significant improvement in China in terms of both supply and demand.

Investors take note

The company declared a cash dividend of 23 cents per share and declined to provide revenue guidance for the next quarter, citing the big challenges — COVID-19, supply chain challenges, inflation, war — everyone now faces. Assuming no additional challenges emerge, Cook expects revenue growth to “accelerate in the September quarter, although some weak pockets are seen.”

The company warned that the rate of service revenue growth may slow over the next quarter.

Apple stock is trading at $162.39 in the aftermarket at the time of writing, up 3.2% at the close.

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