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Apple (AAPL - Free Report) reported third-quarter fiscal 2023 earnings of $1.26 per share, which beat the Zacks Consensus Estimate by 5.88% and increased 5% year over year.
Net sales decreased 1.4% year over year to $81.8 billion, which beat the Zacks Consensus Estimate by 0.54%. Unfavorable forex hurt revenues by almost 400 basis points (bps).
iPhone sales declined 2.4% from the year-ago quarter to $39.67 billion and accounted for 48.5% of total sales. iPhone sales missed the Zacks Consensus Estimate by 0.74%. Apple benefited from strong sales of the iPhone 14 and 14 Plus.
Services revenues grew 8.2% from the year-ago quarter to $21.21 billion and accounted for 25.9% of sales. The figure also beat the consensus mark by 1.76%.
Apple now has more than 1 billion paid subscribers across its Services portfolio, up 150 million year over year.
The company is benefiting from increasing customer engagement in the services segment. The expanding content portfolio of Apple TV+ and Apple Arcade, as well as the launch of its high-yield savings account with Apple Card, helped in driving subscriber growth.
Apple’s fiscal third-quarter results benefited from strong growth in emerging markets like India, Mexico, Indonesia, the Philippines, Poland, Saudi Arabia, Turkey and the UAE.
Europe and Greater China Aids Top Line
Europe generated $20.21 billion in sales, up 4.8% on a year-over-year basis. The region accounted for 24.7% of total sales. Europe’s sales beat the consensus mark by 5.19%.
Greater China sales increased 7.9% from the year-ago quarter to $15.76 billion, accounting for 19.3% of total sales. The figure beat the Zacks Consensus Estimate by 7.44%.
Rest of the Asia Pacific generated sales of $5.63 billion, down 8.5% year over year. The region accounted for 6.9% of total sales. The figure lagged the consensus mark by 5.8%.
America’s sales decreased 5.6% year over year to $35.38 billion and accounted for 39.8% of total sales. The figure missed the Zacks Consensus Estimate by 0.32%.
Japan’s sales of $4.82 billion beat our estimate of $6.11 billion, accounting for 5.9% of total sales. Japan’s sales lagged the consensus mark by 13.46%.
Top-Line Details
Product sales (74.1% of sales) decreased 4.4% year over year to $60.58 billion. Non-iPhone revenues (iPad, Mac and Wearables) decreased 7.8% on a combined basis.
iPad sales of $5.79 billion declined 19.8% year over year and accounted for 7.1% of total sales. The figure missed the Zacks Consensus Estimate by 7.18%.
Mac sales of $7.17 billion decreased 7.3% from the year-ago quarter and accounted for 8.4% of total sales. The figure beat the Zacks Consensus Estimate by 6.65%.
Wearables, Home and Accessories sales increased 2.5% year over year to $8.28 billion and accounted for 10.1% of total sales. The figure missed the consensus mark by 3.26%.
Apple Watch’s adoption rate continues to grow rapidly. More than two-thirds of the customers who purchased the Apple Watch during the reported quarter were first-time customers.
Operating Details
Gross margin of 44.5% expanded 130 bps on a year-over-year basis.
Moreover, the gross margin expanded 20 bps sequentially due to cost savings and a favorable mix shift toward services.
Products’ gross margin contracted 130 bps sequentially to 35.4%. Services’ gross margin was 70.5%, down 50 bps sequentially.
Operating expenses rose 4.7% year over year to $13.42 billion due to higher research & development expenses, which increased 9.5% year over year. Selling, general & administrative expenses decreased 0.6% year over year.
Operating margin expanded 30 bps on a year-over-year basis to 28.1%.
Balance Sheet
As of Jun 30, 2023, cash & marketable securities were $167.08 billion compared with $166.33 billion as of Mar 31, 2023.
Term debt, as of Jun 30, 2023, was $105.29 billion, down from $107.62 billion as of Mar 31, 2023.
Apple returned more than $24 billion in the reported quarter through dividend payouts ($3.8 billion) and share repurchases ($18 billion).
Guidance
Apple did not provide revenue guidance for the fourth quarter of fiscal 2023.
It expects the September quarter’s year-over-year revenue growth to be similar to that of the June quarter due to unfavorable forex of roughly 2%.
Apple expects iPhone and Services’ year-over-year performance to accelerate from the June quarter. Revenues for both Mac and iPad are expected to decline by double digits year-over-year due to difficult comparison, particularly for the Mac.
Gross margin is expected between 44% and 45% in the fiscal fourth quarter. Operating expenses are expected between $13.5 billion and $13.7 billion.
Image: Bigstock
Apple's (AAPL) Q3 Earnings Beat Estimates, Revenues Decline Y/Y
Apple (AAPL - Free Report) reported third-quarter fiscal 2023 earnings of $1.26 per share, which beat the Zacks Consensus Estimate by 5.88% and increased 5% year over year.
Net sales decreased 1.4% year over year to $81.8 billion, which beat the Zacks Consensus Estimate by 0.54%. Unfavorable forex hurt revenues by almost 400 basis points (bps).
iPhone sales declined 2.4% from the year-ago quarter to $39.67 billion and accounted for 48.5% of total sales. iPhone sales missed the Zacks Consensus Estimate by 0.74%. Apple benefited from strong sales of the iPhone 14 and 14 Plus.
Services revenues grew 8.2% from the year-ago quarter to $21.21 billion and accounted for 25.9% of sales. The figure also beat the consensus mark by 1.76%.
Apple now has more than 1 billion paid subscribers across its Services portfolio, up 150 million year over year.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote
The company is benefiting from increasing customer engagement in the services segment. The expanding content portfolio of Apple TV+ and Apple Arcade, as well as the launch of its high-yield savings account with Apple Card, helped in driving subscriber growth.
Apple’s fiscal third-quarter results benefited from strong growth in emerging markets like India, Mexico, Indonesia, the Philippines, Poland, Saudi Arabia, Turkey and the UAE.
Europe and Greater China Aids Top Line
Europe generated $20.21 billion in sales, up 4.8% on a year-over-year basis. The region accounted for 24.7% of total sales. Europe’s sales beat the consensus mark by 5.19%.
Greater China sales increased 7.9% from the year-ago quarter to $15.76 billion, accounting for 19.3% of total sales. The figure beat the Zacks Consensus Estimate by 7.44%.
Rest of the Asia Pacific generated sales of $5.63 billion, down 8.5% year over year. The region accounted for 6.9% of total sales. The figure lagged the consensus mark by 5.8%.
America’s sales decreased 5.6% year over year to $35.38 billion and accounted for 39.8% of total sales. The figure missed the Zacks Consensus Estimate by 0.32%.
Japan’s sales of $4.82 billion beat our estimate of $6.11 billion, accounting for 5.9% of total sales. Japan’s sales lagged the consensus mark by 13.46%.
Top-Line Details
Product sales (74.1% of sales) decreased 4.4% year over year to $60.58 billion. Non-iPhone revenues (iPad, Mac and Wearables) decreased 7.8% on a combined basis.
iPad sales of $5.79 billion declined 19.8% year over year and accounted for 7.1% of total sales. The figure missed the Zacks Consensus Estimate by 7.18%.
Mac sales of $7.17 billion decreased 7.3% from the year-ago quarter and accounted for 8.4% of total sales. The figure beat the Zacks Consensus Estimate by 6.65%.
Wearables, Home and Accessories sales increased 2.5% year over year to $8.28 billion and accounted for 10.1% of total sales. The figure missed the consensus mark by 3.26%.
Apple Watch’s adoption rate continues to grow rapidly. More than two-thirds of the customers who purchased the Apple Watch during the reported quarter were first-time customers.
Operating Details
Gross margin of 44.5% expanded 130 bps on a year-over-year basis.
Moreover, the gross margin expanded 20 bps sequentially due to cost savings and a favorable mix shift toward services.
Products’ gross margin contracted 130 bps sequentially to 35.4%. Services’ gross margin was 70.5%, down 50 bps sequentially.
Operating expenses rose 4.7% year over year to $13.42 billion due to higher research & development expenses, which increased 9.5% year over year. Selling, general & administrative expenses decreased 0.6% year over year.
Operating margin expanded 30 bps on a year-over-year basis to 28.1%.
Balance Sheet
As of Jun 30, 2023, cash & marketable securities were $167.08 billion compared with $166.33 billion as of Mar 31, 2023.
Term debt, as of Jun 30, 2023, was $105.29 billion, down from $107.62 billion as of Mar 31, 2023.
Apple returned more than $24 billion in the reported quarter through dividend payouts ($3.8 billion) and share repurchases ($18 billion).
Guidance
Apple did not provide revenue guidance for the fourth quarter of fiscal 2023.
It expects the September quarter’s year-over-year revenue growth to be similar to that of the June quarter due to unfavorable forex of roughly 2%.
Apple expects iPhone and Services’ year-over-year performance to accelerate from the June quarter. Revenues for both Mac and iPad are expected to decline by double digits year-over-year due to difficult comparison, particularly for the Mac.
Gross margin is expected between 44% and 45% in the fiscal fourth quarter. Operating expenses are expected between $13.5 billion and $13.7 billion.
Zacks Rank & Stocks to Consider
Currently, Apple has a Zacks Rank #3 (Hold).
BILL Holdings (BILL - Free Report) , CACI International (CACI - Free Report) and Cisco Systems (CSCO - Free Report) are some better-ranked stocks that investors can consider in the broader sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BILL Holdings shares have gained 7.8% year to date. BILL is set to report its fourth-quarter fiscal 2023 results on Aug 17.
CACI International shares have gained 18% year to date. CACI is set to report its fourth-quarter fiscal 2023 results on Aug 9.
Cisco Systems shares have returned 10.4% year to date. CSCO is set to report its fourth-quarter fiscal 2023 results on Aug 16.