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Apple reported fiscal third-quarter earnings that exceeded Wall Street expectations, with overall revenue increasing by 5%. Despite the positive earnings report, Apple shares remained flat in extended trading.
Q3 Financial Highlights:
- Earnings per Share (EPS): $1.40, beating the $1.35 expected by analysts polled by LSEG.
- Revenue: $85.78 billion, surpassing the $84.53 billion consensus estimate.
Performance by Segment:
- iPhone Revenue: $39.30 billion, slightly above the $38.81 billion expected. The iPhone remains Apple’s most significant product, accounting for approximately 46% of total sales. However, iPhone revenue declined by 1% year-over-year.
- Mac Revenue: $7.01 billion, nearly meeting the $7.02 billion estimate.
- iPad Revenue: $7.16 billion, significantly higher than the $6.61 billion estimated, marking a strong growth of nearly 24% year-over-year. The release of new iPad models spurred a wave of upgrades, with about half of the buyers being first-time customers.
- Wearables, Home, and Accessories Revenue: $8.10 billion, exceeding the $7.79 billion estimate. This category, which includes products like the Apple Watch, Beats headphones, and HomePod speakers, saw a 2% decline in sales. Notably, two-thirds of Apple Watch buyers were new to the product, indicating a growing customer base.
- Services Revenue: $24.21 billion, slightly above the $24.01 billion estimate. The Services segment, which includes hardware warranties, cloud storage subscriptions, and content subscriptions like Apple TV+, continues to be a key growth area for Apple, with a 14% year-over-year increase.
Other Financial Metrics:
- Gross Margin: 46.3%, slightly above the 46.1% expected.
- Net Income: $21.45 billion, up from $19.88 billion, or $1.26 per share, in the same quarter last year.
Future Outlook: Apple CFO Luca Maestri indicated that the company expects similar overall revenue growth in the current quarter. Services are projected to grow at the same rate as the previous three quarters, around 14%. Apple anticipates operating expenditures between $14.2 billion and $14.4 billion, with a gross margin ranging from 45.5% to 46.5%.
Strategic Focus and Market Challenges: CEO Tim Cook noted the company’s increased investment in artificial intelligence (AI) and the upcoming Apple Intelligence service, set to launch later this fall. Cook highlighted that Apple has reallocated resources to focus on AI development, which is reflected in the company’s current spending.
Despite the positive results, Apple faces challenges in certain markets. Sales in Greater China, including Taiwan and Hong Kong, fell 6% to $14.72 billion. The company is under pressure from local competitors like Huawei, which are introducing rival products.
Shareholder Returns: Apple returned $32 billion to shareholders through dividends and share repurchases during the quarter.
Active Device and Subscription Growth: Apple reported having more active devices across all regions than ever before, though specific numbers were not disclosed. The company previously stated in February that it had 2.2 billion active devices. Additionally, Apple has reached 1 billion paid subscriptions, including those through the App Store.
Long-Term Confidence: Despite the challenges, Cook expressed confidence in Apple’s long-term prospects, stating, “I don’t know how every chapter of the book reads, but we’re very confident in the long term.”