Apple (AAPL) Q3 2022 results

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Apple reported fiscal third quarter results Thursday beat Wall Street expectations for sales and earnings, but showed slowing growth for the iPhone maker.

Apple stock rose more than 3% in extended trading.

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

  • EPS: $1.20 vs. $1.16 estimated, down 8% year-over-year
  • Revenue: $83 billion vs $82.81 billion estimated, up 2% year-over-year
  • iPhone revenue: $40.67 billion vs. $38.33 billion estimated, up 3% year-over-year
  • Service revenue: $19.60 billion vs. $19.70 billion estimated, up 12% year-over-year
  • Others products revenue: $8.08 billion vs. $8.86 billion estimated, down 8% year-over-year
  • Mac revenue: $7.38 billion vs. $8.70 billion estimated, down 10% year-over-year
  • iPad revenue: $7.22 billion vs. $6.94 billion estimated, down 2% year-over-year
  • Gross margin: 43.26% against 42.61% estimated

Apple did not provide formal guidance for the quarter. Analysts had expected the company to give fourth-quarter guidance of $1.31 in earnings per share and nearly $90 billion in sales.

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

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

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Chipmakers and other computer vendors have reported slowing demand for smartphones and PCs around the world as consumers grapple with recession fears and high inflation for decades. Apple’s weak growth may suggest that the consumer electronics industry – including leaders like Apple – is headed for a period of slow or no growth.

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

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

Apple’s iPhone sales beat Wall Street expectations, suggesting that demand for the iPhone 13 models remains strong even in the second half of the product’s annual release cycle. Apple typically launches new iPhones in September, and sales drop as customers anticipate new models.

Cook said Apple was successful in attracting Android customers to become iPhone owners during the quarter.

“We had an all-time high in Switches and saw double-digit growth for customers new to iPhone,” Cook said.

The Services business was the fastest growing segment for Apple during the quarter. It includes monthly subscriptions, payment fees, warranties, Google search license fees, and iPhone App Store revenue.

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

Cook said Apple has 860 million current paid subscriptions, which includes anyone who subscribes to an app sold on Apple’s App Store in addition to products such as Apple Music and iCloud.

Mac sales were below consensus expectations and fell more than 10% year over year. Cook said this was due to supply constraints and the strong dollar.

In April, Apple warned parts shortages would weigh $4 billion to $8 billion on revenue, and Apple’s website showed extended shipping times for many Mac models in the quarter. Cook said the ultimate hit was less than $4 billion.

Apple also announced new MacBook Air models in June that didn’t start shipping to customers until July. MacBook Air is Apple’s best-selling computer.

Apple’s iPad fell 2% annually, but beat Wall Street’s soft forecast as iPad tablets were one of the product lines analysts thought Apple might favor in the face of a shortage of fleas. Cook said the iPad’s decline was also due to supply constraints and a strong dollar.

Apple’s other products category, which includes headphones like AirPods, Apple Watches and HomePod speakers, fell more than 8% year-on-year and missed Wall Street 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 despite major Covid restrictions hurting demand.

Apple’s gross margin exceeded the company’s own forecast from April. Apple posted a gross margin of 43.26%, above the 42% to 43% range the company suggested earlier this year.

Apple said it spent more than $28 billion on stock buybacks and dividends during the quarter.

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