iPhone maker Apple Inc. delivered strong financial results today that bucked investor’s concerns over a deteriorating macroeconomic environment that might impact demand for high-end smartphones and other devices.
Even so, the company’s stock fell slightly in extended trading after a warning that it still faces multiple challenges. These include ongoing supply constraints related to COVID-19 that could negatively impact sales by as much as $4 billion to $8 billion, Apple said. Further, executives warned that demand for its products in China is being impacted by the continued lockdowns there.
The company reported earnings before certain costs such as stock compensation of $1.52 per share on sales of $97.28 billion, up nearly 9% from the same period one year ago. That yielded a net profit of $25 billion for the quarter and it surpassed expectations. Wall Street had forecast earnings of just $1.43 per share on lower sales of $93.9 billion.
Apple’s stock fell more than 2% in the extended trading session, having gained more than 4% during the day.
Apple Chief Executive Tim Cook (pictured) said the strong results were a testament to the company’s relentless focus on innovation and its ability to create the best products and services in the world.
“We are delighted to see the strong customer response to our new products, as well as the progress we’re making to become carbon neutral across our supply chain and our products by 2030,” Cook said. “We are committed, as ever, to being a force for good in the world — both in what we create and what we leave behind.”
Apple’s biggest money maker by far is its iconic iPhone, which generated revenue of $50.5 billion in the quarter, up 5.5% from a year ago and above the analyst consensus of $47.8 billion. The results provide strong evidence that Apple’s latest iPhone 13 model continues to sell well. Cook said the company saw a lot of sales to “switchers”, who are people that previously owned an Android phone but switched to an iPhone.
“We had a record level of upgraders during the quarter and we grew switchers, strong double digits,” Cook told CNBC in an interview after the earnings call.
Apple’s Mac computers also continued to fly off the shelves, coming after the company transitioned its latest models to use its own M1 processors instead of chips supplied by Intel Corp. Sales of Macs rose almost 15% to $10.44 billion, ahead of the $9.25 billion consensus.
The iPad business was less successful though, with sales there falling almost 2% to $7.65 billion, however that still came in ahead of the $7.14 billion estimate. Cook blamed the lower sales on “very significant supply constraints”.
Still, the company’s profitable services business went from strength to strength, with revenue of $19.82 billion, up 17% from a year ago and ahead of the $19.72 billion estimate. The services business includes revenue from subscriptions, licensing fees and extended warranties. It’s notable however, that the business has made a habit of beating expectations by between 3% and 8% over the last couple of years. This time though, it only exceeded estimates by 0.5%.
Apple Chief Financial Officer Luca Maestri told CNBC that comparisons are a bit strange because there have been multiple lockdowns and reopenings during the Covid pandemic. During lockdowns, “digital content went through the roof,” he said.
Sales from Apple’s other products, such as its iPod devices and its wearables, pulled in $8.81 billion in sales, up 12.3% but below the $9.05 billion estimate.
On the conference call, Cook said Apple’s overall performance was “better than anticipated” thanks in part to a 20% sales jump in the Americas region. Sales in Greater China, which includes Hong Kong and Taiwan, grew at a much slower rate of just 3.47%
Apple once again declined to issue formal revenue guidance, citing uncertainty due to the pandemic.
The company announced that its board of directors had authorized a $90 billion share buyback this year, maintaining its position as the public company that spends the most buying back its own shares. In 2021, the company spent $88.3 billion on buying back shares.