Apple reported declining sales for the past quarter, indicating a dwindling smartphone demand. Apple attributed it partly to foreign exchange fluctuations and said the company broke the Service business records.
Apple released its financial results for the fiscal third quarter that ended on July 1. Sales declined by 1.4% year-on-year due to the dollar devaluation, with net income growing by 2.26% from a year ago.
Apple CEO Tim Cook said that driven by over US$1 billion paid subscriptions, the company had an all-time revenue record in Services during the June quarter. Apple saw continued strength in emerging markets thanks to robust sales of iPhones. Meanwhile, Apple CFO Luca Maestri said the company's year-over-year business performance improved from the March quarter, with the installed base of active devices also reaching an all-time high in every geographic segment.
Revenue generated by iPhone for the quarter was US$39.7 billion, down 2% year-on-year. Mac recorded US$6.8 billion in sales, down 7% year-over-year, and iPad revenue was US$5.8 billion, down 20% annually. Apple's Wearable, Home & Accessories revenue rose by 2% to US$8.3 billion, in line with Apple's expectations. The Services business saw a sequential acceleration to an 8% year-over-year increase, better than Apple expected and an all-time revenue record for the business, said Cook.
Despite declining sales generated by the iPhone, the largest revenue source of Apple, Cook said that on a constant-currency basis, iPhone revenue grew, and Apple had a June quarter record for switchers. Maestri also said on the earnings call that Apple's revenue grew year-on-year in total on a constant-currency basis.
As for the guidance, Maestri said that Apple expected September sales performance to be similar to the June quarter, assuming that the macroeconomic outlook does not worsen. Foreign exchange will continue to be a headwind, with an expected negative impact of two percentage points. iPhone and Services year-on-year performance is expected to accelerate from the June Quarter, while revenues for Mac and iPad are anticipated to decline by double-digit year-on-year. Maestri said that the gross margin for the September quarter is expected to be 44-45%.
Cook said Apple broke revenue records in India, Indonesia, Mexico, the Philippines, Poland, Saudi Arabia, Turkey, and the UAE, with revenue from India growing by double-digits. Cook said Apple still has a very modest and low share in India, the second-largest smartphone market in the world, and there will be a huge opportunity for Apple.
Daniel Flax, a senior research analyst at Neuberger Berman, told Bloomberg Television that the current business landscape is challenging for not only Apple but also many other companies as consumers encounter pressures from rate hikes and inflations.
Bloomberg Intelligence said in a note that Apple's Services unit outperformed the consensus by over 200 basis points, compensating for a slight underperformance in the iPhone unit, and there were signs of improvement in the Mac business as demand seemed to be picking up after a challenging period spanning a few quarters.
Apple's income statement (US$m) | ||||||
Results | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | YoY for 3Q23 (%) |
Sales | 82,959 | 90,146 | 117,154 | 94,836 | 81,797 | -1.4 |
Gross profit | 35,885 | 38,095 | 50,332 | 41,976 | 36,413 | 1.47 |
Operating income | 23,076 | 24,894 | 36,016 | 28,318 | 22,998 | -0.34 |
Net income | 19,442 | 20,721 | 29,998 | 24,160 | 19,881 | 2.26 |
Source: Apple, August, 2023
Apple's sales by geography (US$m) | ||||||
Geography | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | YoY for 3Q23 (%) |
Americas | 37,472 | 39,808 | 49,278 | 37,784 | 35,383 | -5.57 |
Europe | 19,287 | 22,795 | 27,681 | 23,945 | 20,205 | 4.76 |
Greater China | 14,604 | 15,470 | 23,905 | 17,812 | 15,758 | 7.9 |
Rest of Asia Pacific | 6,150 | 6,373 | 9,535 | 8,119 | 5,630 | -8.46 |
Japan | 5,446 | 5,700 | 6,755 | 7,176 | 4,821 | -11.48 |
Source: Apple, August, 2023
Apple sales by product and service (US$m) | ||||||
Product/service | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | YoY for 3Q23 (%) |
iPhone | 40,665 | 42,626 | 65,775 | 51,334 | 39,669 | -2.45 |
Wearables, Home & Accessories | 8,084 | 9,650 | 13,482 | 8,757 | 8,284 | 2.47 |
Mac | 7,382 | 11,508 | 7,735 | 7,168 | 6,840 | -7.34 |
iPad | 7,224 | 7,174 | 9,396 | 6,670 | 5,791 | -19.84 |
Services | 19,604 | 19,188 | 20,766 | 20,907 | 21,213 | 8.21 |
Source: Apple, August, 2023
