1. @Apple did not have a great quarter. For the third quarter in a row, sales declined year on year, this quarter, by 1%. At least the declines are getting smaller: in the first calendar quarter, the decline was 3%, and in the fourth calendar quarter of last year, it was 5%. So perhaps this signals a return to growth in the coming quarter. In better news, profits were up by 2.2%.
(Apple’s fiscal year is an irregular one. Not only does its fiscal year not align with the calendar year, also its fiscal quarters often do not begin or end with the first and last days of the corresponding calendar quarters. Alas, fear not! I normalized everything to calendar quarters, ignoring the occasional deviation of fiscal quarters from calendar quarters by a few days.)
2. Hardware Down. All hardware segments -iPhone, Mac, iPad- were down, with the exception of the Wearables, Home And Accessories segment. One could say the Apple Watch scored the consolation goal in hardware, to put it in soccer terms. iPhone sales were down 2% due to saturated developed markets, buoyed in part by strong sales in emerging markets, particularly in China, where Apple landed a double digit growth rate. The Mac segment was down 7%, the iPad segment, down a whopping 20%.
3. Where is the next hit? Certainly, part of the weakness in hardware must be attributed to saturated markets. Another part, to the continuing economic uncertainty that may prompt both consumers and enterprises to pull their purse strings tighter. But a lack of innovation also plays a role. The recently announced Vision Pro headset will set you back by $3,500 while displaying on your goggles what you would otherwise see on the display of your iPhone – at least that’s what Apple’s own demo videos show. It will also only be available next year. At least it’s an augmented reality (AR) device, a segment for which I still see a great future – as opposed to virtual reality (VR). But at that price point, it will be many years beyond 2024 before it makes any material impact on Apple’s sales.
4. Services save the day. Apple’s results would have been worse, had it not been for the great performance of the Services segment. A catch-all for everything else, it includes Apple TV+, Apple Pay, iCloud, advertising, and Apple Music. It enjoyed a growth rate of 8%, mainly driven by iCloud, Apple Music and advertising. Talking about advertising, Apple does not disclose its advertising revenues, but a Bloomberg estimate had put it at about $4B in 2022, standing for about 5% of total revenue, and enjoying fast growth over the last few years. Not too shabby!
5. Stock Down. Revenue slightly exceeded forecasts, profits exceeded them moderately. Still, the market reacted slightly disappointed, with Apple’s stock price down 3% in after-hours trading.
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