Apple (AAPL) Q3 Earnings 2022

Apple informed financial result for the third quarter on Thursday, which beat Wall Street’s sales and earnings expectations, but showed a slowdown in the iPhone maker’s growth.

Apple shares rose more than 3% in extended trading.

Here are the key numbers compared to what Wall Street expected, according to Refinitiv estimates:

  • earnings per share: $1.20 vs. estimated $1.16, down 8% from last year.
  • IncomeA: $83 billion vs. An estimated $82.81 billion, up 2% over last year.
  • iPhone income: $40.67 billion, up from $40.67 billion at an estimated $38.33 billion, up 3% from last year.
  • Service income: $19.60 billion versus an estimated $19.70 billion, up 12% from last year.
  • Other products incomeA: $8.08 billion vs. An estimated $8.86 billion, down 8% from last year.
  • Mac income: $7.38 billion compared to $7.38 billion at an estimated $8.70 billion, down 10% from last year.
  • iPad income: $7.22 billion vs. An estimated $6.94 billion, down 2% from last year.
  • Gross profit: 43.26% compared to 42.61% estimated

Apple hasn’t released official guidance for the quarter. Analysts had expected the company to report fourth-quarter earnings of $1.31 a share and about $90 billion in sales.

“In terms of the overall outlook, we expect revenue to accelerate in the September quarter despite some weaknesses,” Apple CEO Tim Cook told CNBC’s Steve Kovacs.

Apple’s revenue rose 2% during the quarter, compared to 36% growth in the same period last year and more than 8% growth in the March quarter. Cook said the results were better than expected and CFO Luca Maestri said it was a “challenging operating environment”.

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Chip makers and other computer vendors are signaling a slowdown in demand for smartphones and PCs around the world as consumers grapple with fears of recession and decades of inflation. Apple’s mild growth may indicate that the consumer electronics industry, including leaders like Apple, is heading into a period of slow or no growth.

Cook told CNBC that the company is experiencing inflation but will continue to invest.

“We do see inflation in our cost structure,” Cook said. “We see it in things like logistics, payroll and some silicon components, and we’re still hiring, but we’re doing it consciously.”

Apple iPhone sales have beaten Wall Street’s expectations, indicating that demand for iPhone 13 models remains strong even in the second half of the product’s annual release cycle. Apple usually releases new iPhones in September and sales are falling as customers wait for new models.

Cook said that Apple was able to attract Android users and become iPhone owners during the quarter.

“We had a record number of switches and saw double-digit growth in new iPhone users,” Cook said.

The services division was the fastest growing segment for Apple during the quarter. It includes a monthly subscription, payment fees, warranties, search license fees from Google, and income from the iPhone App Store.

Services grew more than 12% during the quarter, although this is down from the 17% growth recorded in the second quarter and compared to the 27% growth reported for the same period last year.

Cook said Apple has 860 million current paid subscriptions, including anyone who subscribes to an app sold on the Apple App Store, in addition to products like Apple Music and iCloud.

Mac sales fell short of consensus expectations and fell more than 10% year-on-year. Cook said this was due to supply constraints and a strong dollar.

In April, Apple warned that a shortage of parts would hurt revenues by between $4 billion and $8 billion, and Apple’s website indicated an increase in delivery times for many Mac models during the quarter. Cook said the eventual success was less than $4 billion.

In June, Apple also announced new MacBook Air models that won’t ship to customers until July. The MacBook Air is Apple’s best-selling computer.

Prices for Apple’s iPads were down 2% a year but beat Wall Street’s milder forecasts as iPads were one of the product lines analysts said Apple could prioritize amid chip shortages. Cook said the decline in iPad sales was also driven by supply constraints and a strong dollar.

The category of Apple’s other products, which includes headphones such as AirPods, Apple Watch and HomePod speakers, is down more than 8% year-on-year and fell short of Wall Street’s expectations.

Apple’s business in Greater China, which includes Taiwan and Hong Kong, fell 1% year on year to $14.6 billion. Cook said the result was achieved despite severe Covid restrictions that have reduced demand.

Apple’s gross margin topped the company’s own April forecast. Apple reported a 43.26% gross margin, compared to the 42% to 43% range the company offered earlier this year.

Apple said it spent more than $28 billion during the quarter on share repurchases and dividend payments.