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Apple (AAPL) earnings Q1 2023


Apple missed expectations for revenue, profit, and sales for a lot of its lines of business on Thursday, sending the stock lower in prolonged trading. Apple’s overall sales for the vacation quarter were about 5% lower than last 12 months’s, the primary year-over-year sales decline since 2019.  

Apple CEO Tim Cook said three aspects hurt the outcomes: a strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the general macroeconomic environment. 

“On the third factor, I might say was just the difficult macroeconomic environment, and also you’re hearing that from, I might think, everybody,” Cook told CNBC’s Steve Kovach. 

Apple shares dropped over 4% at one point during prolonged trading on Thursday before rising after the tech giant provided data about outlook for the present quarter. The corporate’s data points suggested iPhone sales won’t decline as rapidly as they did through the holiday quarter.

Here’s how Apple did versus Refinitiv consensus expectations: 

  •  EPS: $1.88 vs. $1.94 estimated, down 10.9% 12 months over 12 months 
  •  Revenue: $117.15 billion vs. $121.10 billion estimated, down 5.49% 12 months over 12 months 
  •  iPhone revenue: $65.78 billion vs. $68.29 billion estimated, down 8.17% 12 months over 12 months 
  •  Mac revenue: $7.74 billion vs. $9.63 billion estimated, down 28.66% 12 months over 12 months 
  •  iPad revenue: $9.4 billion vs. $7.76 billion estimated, up 29.66% 12 months over 12 months 
  •  Other Products revenue: $13.48 billion vs. $15.23 billion estimated, down 8.3% 12 months over 12 months 
  •  Services revenue: $20.77 billion vs. $20.67 billion estimated, up 6.4% 12 months over 12 months 
  •  Gross margin: 42.96% vs. 42.95% estimated 

Apple didn’t provide guidance for the present quarter ending in March. It hasn’t provided guidance since 2020, at first citing uncertainty brought on by the pandemic. Analysts expected the corporate to guide to about $98 billion in sales in the corporate’s fiscal second quarter. 

Nonetheless, Apple did offer some data points on performance expectations. Chief Financial Officer Luca Maestri said March quarter revenue would have the same declining trend because the December quarter. Services are expected to grow, Maestri said, but Mac and iPad sales are each expected to say no double digits from the year-earlier period. IPhone sales will decline less within the March quarter versus the December quarter, Apple added.

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The quarter was a surprising miss by Apple, and its first earnings miss versus consensus expectations in almost seven years. In reality, it was only its second revenue miss since August 2017, with sales coming in greater than 3% below consensus expectations.  

It also represented a regression from Apple’s success over the past two years driven by a necessity for brand new computers to work and go to highschool from home. It was Apple’s first year-over-year quarterly revenue decline since 2019 and the most important annual quarterly revenue drop since September 2016. 

Cook told CNBC that the miss was partially due to a powerful dollar. He said Apple grew in most markets should you controlled for 800 basis points of foreign exchange headwinds. A basis point equals 0.01 of a percentage point.   

Cook added that the availability of iPhone 14 Pro and iPhone 14 Max was significantly reduced through the quarter, meaning there have been fewer phones to sell to customers. The first iPhone assembly plant in China was affected by Covid lockdowns through the quarter, a warning that had been made to investors in November. 

 “We put out an update on that on November sixth and it lasted through most of December,” Cook said “So we had a giant hole there.” 

The Apple CEO said that production is now back to levels Apple is comfortable with. 

Cook said the difficult macroeconomic environment affected iPhone sales, Mac sales, and sales of wearables just like the Apple Watch. IPhone and Mac sales were down 12 months over 12 months. Apple’s other products category, which incorporates headphones like AirPods and wearables like Apple Watch, declined over 8%. 

Cook said Mac sales fell since it was difficult to match the quarter to last 12 months’s period, through which the corporate released latest high-end MacBook Pro laptops. There have been no similar launches during this 12 months’s December quarter, he noted.  

The report offered investors a couple of brilliant spots. First, Apple disclosed that it has 2 billion lively devices, including iPhones, Macs, Apple Watches, and other products, a rise from the 1.8 billion lively devices it revealed last 12 months in January.  

The number is significant to investors since it summarizes the corporate’s global reach and suggests upside if the corporate can higher monetize those customers through services or other additional products.  

“We attribute that to having numerous switchers and numerous first-time buyers within the case of the Apple Watch,” Cook said. “And so obviously you’ll want to usher in people who usually are not currently lively on a tool in an effort to grow.” 

IPad sales grew nearly 30% 12 months over 12 months after it released a low-end, inexpensive model in addition to a latest high-end model through the quarter. It is a redeeming area in Apple’s hardware business and is a reversal of last December quarter, through which Mac revenue surged and iPad’s revenue fell.  

One other silver lining for investors: Apple reported 6% growth in its services business, beating analyst expectations.  

Management said cloud services, payments including Apple Pay and Apple Card, and music were strong components of services. Cook added that Apple employees are beta testing a buy-now-pay-later feature that can be a part of services.  “It can be launching soon,” he added.  

Cook said that Apple is cutting costs and has slowed hiring. However it has not announced layoffs unlike many rival tech firms.  

“We’re also recognizing the environment that we’re in is hard. And so we’re cutting costs. We’re cutting hiring, we’re being very prudent and deliberate on people who we hire,” Cook said.  


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