Tuesday, May 28

Apple Reports Q4 Earnings Beat, but Faces Challenges in Non-iPhone Hardware Sales

Apple reported its fiscal fourth-quarter earnings, beating analyst expectations for sales and earnings per share, but revealed a decline in overall sales for the fourth consecutive quarter. Every hardware business outside of the iPhone declined year over year, with significant drops in the iPad and Mac segments. Following this announcement, Apple’s shares fell over 3% in extended trading.

In terms of financial performance, here’s how Apple fared compared to LSEG consensus expectations:

  • Earnings per Share (EPS): $1.46 per share vs. $1.39 per share expected
  • Revenue: $89.5 billion vs. $89.28 billion expected
  • iPhone revenue: $43.81 billion vs. $43.81 billion expected
  • Mac revenue: $7.61 billion vs. $8.63 billion expected
  • iPad revenue: $6.44 billion vs. $6.07 billion expected
  • Wearables revenue: $9.32 billion vs. $9.43 billion expected
  • Services revenue: $22.31 billion vs. $21.35 billion expected
  • Gross margin: 45.2% vs. 44.5% expected

While Apple didn’t provide formal guidance, it stated that it expected December quarter revenue to be “similar to” last year’s revenue, despite this year’s December quarter having one fewer week.

Analysts had anticipated $122.98 billion in revenue for the December quarter, representing a return to year-over-year growth of about 5% in Apple’s most important quarter.

Apple’s net income was $22.96 billion, or $1.46 per share, compared to $20.72 billion, or $1.29 per share, during the same period the previous year. The company reported $383.29 billion in sales for the full fiscal year, a decrease of approximately 3% from the prior year. In the September quarter, quarterly revenue declined by less than 1%.

Apple’s iPhone sales were in line with Wall Street expectations and increased by more than 2% compared to the previous year, making it the only hardware line to show growth in the quarter. Apple CEO Tim Cook mentioned that the iPhone 15 had outperformed the iPhone 14 during the same period last year. However, the Pro and Pro Max iPhones faced supply constraints due to high demand.

Apple’s Mac and iPad businesses both experienced declines during the quarter, with Mac sales falling by nearly 34% year over year. Despite holding a launch event for new MacBook Pro laptops and iMac desktops last month, these sales fell short of Wall Street expectations. Cook suggested that the new Mac products, featuring the M3 chips, would contribute to better performance in the upcoming quarter.

iPad revenue also decreased, falling by 10% from the same period the previous year. Unlike previous years, Apple did not announce new products ahead of the holiday season.

On a positive note, Apple’s services business showed significant growth, with services revenue reaching $22.31 billion, surpassing analyst expectations and increasing more than 16% from the previous year. Apple’s services division includes online subscriptions such as iCloud storage and Apple Music, as well as warranties from AppleCare. Additionally, Apple’s partnership with Google as the default search engine on Safari contributed an estimated $19 billion in payments to Apple.

Apple’s wearables business unit, including products like AirPods and Apple Watch, decreased by over 3% year over year.

In the Greater China region, Apple’s third-largest market, sales remained relatively flat year over year, reaching $15.08 billion.

Despite the fluctuations in sales, Apple maintains a significant cash reserve, with $162.1 billion in cash on hand. The company also announced a dividend of 24 cents per share for the month and reported spending $25 billion during the quarter on share repurchases and dividends.

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