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Apple (AAPL) Q2 Earnings Beat Estimates, Revenues Decline Y/Y
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Apple (AAPL - Free Report) reported second-quarter fiscal 2023 earnings of $1.52 per share, which beat the Zacks Consensus Estimate by 5.56% and our estimate of $1.39 per share.
The reported earnings figure was unchanged year over year.
Net sales decreased 2.5% year over year to $94.84 billion, which beat the Zacks Consensus Estimate by 1.63% and our estimate of $91.91 billion. Unfavorable forex hurt revenues by more than 500 basis points (bps).
iPhone sales inched up 1.5% from the year-ago quarter to $51.33 billion and accounted for 54.1% of the total sales. Our estimate for fiscal second-quarter iPhone sales was pegged at $48.81 billion.
Apple benefited from strong sales of iPhone 14 and 14 Plus. In the reported quarter, the company expanded emergency SOS via satellite to six new countries, bringing the service to a total of 12 countries.
Services revenues grew 5.5% from the year-ago quarter to $20.91 billion and accounted for 22% of sales. Our estimate for fiscal second-quarter Services revenues was pegged at $20.85 billion.
Apple has more than 975 million paid subscribers across its Services portfolio, up 40 million sequentially and 150 million year over year.
The company is benefiting from increasing customer engagement in the services segment. Transacting accounts and paid accounts grew in the double digits on a year-over-year basis in the reported quarter.
Apple’s fiscal second-quarter results benefited from strong growth in emerging markets like Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey, the UAE, Brazil, Malaysia and India.
Europe and the Rest of Asia Aid Top Line
Europe generated $23.95 billion in sales, up 2% on a year-over-year basis. The region accounted for 25.2% of total sales. Europe’s sales beat our estimate of $22.08 billion.
Rest of the Asia Pacific generated sales of $8.12 billion, up 15.3% year over year. The region accounted for 8.6% of the total sales. The figure beat our estimate of $6.86 billion.
America’s sales decreased 7.6% year over year to $37.78 billion and accounted for 39.8% of the total sales. The figure missed our estimate of $39.85 billion.
Greater China sales decreased 2.9% from the year-ago quarter to $17.81 billion, accounting for 18.8% of the total sales. The figure beat our estimate of $17 billion.
Japan’s sales of $7.18 billion beat our estimate of $6.11 billion, accounting for 7.6% of the total sales. Japan’s sales decreased 7.1% year over year.
Top-Line Details
Product sales (78% of sales) decreased 4.6% year over year to $73.93 billion. Non-iPhone revenues (iPad, Mac and Wearables) decreased 31.1% on a combined basis.
iPad sales of $6.67 billion declined 12.8% year over year and accounted for 7% of the total sales. The figure missed our estimate of $6.79 billion.
Mac sales of $7.17 billion decreased 31.3% from the year-ago quarter and accounted for 7.6% of the total sales. The figure beat our estimate of $7.12 billion. Mac suffered from challenging macroeconomic conditions.
Wearables, Home and Accessories sales decreased 40.4% year over year to $8.76 billion and accounted for 9.2% of the total sales. The figure beat our estimate of $8.76 billion.
Apple Watch’s adoption rate continues to grow rapidly. More than two-thirds of the customers who purchased the Apple Watch in the reported quarter were first-time customers.
Operating Details
The gross margin of 44.3% expanded 50 bps on a year-over-year basis.
The gross margin expanded 130 bps sequentially due to cost savings and a favorable mix shift toward services.
Products’ gross margin contracted 30 bps sequentially to 36.7%. Services’ gross margin was 71%, up 20 bps sequentially.
Operating expenses rose 8.6% year over year to $13.66 billion due to higher research and development, and selling, general and administrative expenses, which increased 16.8% and 0.1%, respectively.
The operating margin contracted 100 bps on a year-over-year basis to 29.9%.
Balance Sheet
As of Mar 31, 2023, cash and marketable securities were $166.33 billion compared with $165.45 billion as of Dec 31, 2022.
Term debt, as of Mar 31, 2023, was $107.62 billion, down from $109.37 billion as of Dec 31, 2022.
Apple returned more than $23 billion in the reported quarter through dividend payouts ($3.7 billion) and share repurchases ($19.1 billion).
Its board expanded share repurchase by $90 billion and raised dividends by 4% to 24 cents per share.
Guidance
Apple did not provide revenue guidance for the third quarter of fiscal 2023.
It expects the June quarter’s year-over-year revenue growth to be similar to that of the March quarter due to unfavorable forex of 4%.
Services’ revenue growth in the fiscal third quarter is expected to be similar to the March quarter. It expects services to be negatively impacted by challenging macroeconomic conditions, as well as weakness in digital advertising and mobile gaming.
The gross margin is expected between 44% and 44.5% in the fiscal third quarter. Operating expenses are expected between $13.6 billion and $13.8 billion.
Image: Bigstock
Apple (AAPL) Q2 Earnings Beat Estimates, Revenues Decline Y/Y
Apple (AAPL - Free Report) reported second-quarter fiscal 2023 earnings of $1.52 per share, which beat the Zacks Consensus Estimate by 5.56% and our estimate of $1.39 per share.
The reported earnings figure was unchanged year over year.
Net sales decreased 2.5% year over year to $94.84 billion, which beat the Zacks Consensus Estimate by 1.63% and our estimate of $91.91 billion. Unfavorable forex hurt revenues by more than 500 basis points (bps).
iPhone sales inched up 1.5% from the year-ago quarter to $51.33 billion and accounted for 54.1% of the total sales. Our estimate for fiscal second-quarter iPhone sales was pegged at $48.81 billion.
Apple benefited from strong sales of iPhone 14 and 14 Plus. In the reported quarter, the company expanded emergency SOS via satellite to six new countries, bringing the service to a total of 12 countries.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote
Services revenues grew 5.5% from the year-ago quarter to $20.91 billion and accounted for 22% of sales. Our estimate for fiscal second-quarter Services revenues was pegged at $20.85 billion.
Apple has more than 975 million paid subscribers across its Services portfolio, up 40 million sequentially and 150 million year over year.
The company is benefiting from increasing customer engagement in the services segment. Transacting accounts and paid accounts grew in the double digits on a year-over-year basis in the reported quarter.
Apple’s fiscal second-quarter results benefited from strong growth in emerging markets like Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey, the UAE, Brazil, Malaysia and India.
Europe and the Rest of Asia Aid Top Line
Europe generated $23.95 billion in sales, up 2% on a year-over-year basis. The region accounted for 25.2% of total sales. Europe’s sales beat our estimate of $22.08 billion.
Rest of the Asia Pacific generated sales of $8.12 billion, up 15.3% year over year. The region accounted for 8.6% of the total sales. The figure beat our estimate of $6.86 billion.
America’s sales decreased 7.6% year over year to $37.78 billion and accounted for 39.8% of the total sales. The figure missed our estimate of $39.85 billion.
Greater China sales decreased 2.9% from the year-ago quarter to $17.81 billion, accounting for 18.8% of the total sales. The figure beat our estimate of $17 billion.
Japan’s sales of $7.18 billion beat our estimate of $6.11 billion, accounting for 7.6% of the total sales. Japan’s sales decreased 7.1% year over year.
Top-Line Details
Product sales (78% of sales) decreased 4.6% year over year to $73.93 billion. Non-iPhone revenues (iPad, Mac and Wearables) decreased 31.1% on a combined basis.
iPad sales of $6.67 billion declined 12.8% year over year and accounted for 7% of the total sales. The figure missed our estimate of $6.79 billion.
Mac sales of $7.17 billion decreased 31.3% from the year-ago quarter and accounted for 7.6% of the total sales. The figure beat our estimate of $7.12 billion. Mac suffered from challenging macroeconomic conditions.
Wearables, Home and Accessories sales decreased 40.4% year over year to $8.76 billion and accounted for 9.2% of the total sales. The figure beat our estimate of $8.76 billion.
Apple Watch’s adoption rate continues to grow rapidly. More than two-thirds of the customers who purchased the Apple Watch in the reported quarter were first-time customers.
Operating Details
The gross margin of 44.3% expanded 50 bps on a year-over-year basis.
The gross margin expanded 130 bps sequentially due to cost savings and a favorable mix shift toward services.
Products’ gross margin contracted 30 bps sequentially to 36.7%. Services’ gross margin was 71%, up 20 bps sequentially.
Operating expenses rose 8.6% year over year to $13.66 billion due to higher research and development, and selling, general and administrative expenses, which increased 16.8% and 0.1%, respectively.
The operating margin contracted 100 bps on a year-over-year basis to 29.9%.
Balance Sheet
As of Mar 31, 2023, cash and marketable securities were $166.33 billion compared with $165.45 billion as of Dec 31, 2022.
Term debt, as of Mar 31, 2023, was $107.62 billion, down from $109.37 billion as of Dec 31, 2022.
Apple returned more than $23 billion in the reported quarter through dividend payouts ($3.7 billion) and share repurchases ($19.1 billion).
Its board expanded share repurchase by $90 billion and raised dividends by 4% to 24 cents per share.
Guidance
Apple did not provide revenue guidance for the third quarter of fiscal 2023.
It expects the June quarter’s year-over-year revenue growth to be similar to that of the March quarter due to unfavorable forex of 4%.
Services’ revenue growth in the fiscal third quarter is expected to be similar to the March quarter. It expects services to be negatively impacted by challenging macroeconomic conditions, as well as weakness in digital advertising and mobile gaming.
The gross margin is expected between 44% and 44.5% in the fiscal third quarter. Operating expenses are expected between $13.6 billion and $13.8 billion.
Zacks Rank & Stocks to Consider
Currently, Apple has a Zacks Rank #3 (Hold).
Blink Charging (BLNK - Free Report) , Enfusion (ENFN - Free Report) and DigitalOcean (DOCN - Free Report) are some better-ranked stocks that investors can consider in the Zacks Computer & Technology sector. Enfusion sports a Zacks Rank #1 (Strong Buy), and Blink and DigitalOcean carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Blink Charging shares have declined 35% year to date. BLNK is set to report its first-quarter 2023 results on May 9.
Enfusion shares have lost 9.5% year to date. ENFN is set to report its first-quarter 2023 results on May 9.
DigitalOcean shares have gained 28% year to date. DOCN is set to report its first-quarter 2023 results on May 9.