Apple earnings (AAPL) for the third quarter of 2022

Apple announced its third-quarter financial earnings on Thursday that beat Wall Street forecasts for sales and profits but showed sluggish growth for the iPhone maker.

Apple stock is up more than 3% in extended trading.

Here are the key numbers compared to what Wall Street was expecting, according to Refinitiv estimates:

  • EPS: $1.20 vs. $1.16 estimated, down 8% YoY
  • he won: $83 billion versus an estimated $82.81 billion, up 2% year over year
  • iPhone revenue: $40.67 billion versus $38.33 billion estimated, up 3% year on year
  • Service revenue: $19.60 billion versus an estimated $19.70 billion, up 12% year-over-year
  • other products he won: $8.08 billion versus $8.86 billion estimated, down 8% year on year
  • Mac earnings: $7.38 billion versus $8.70 billion estimated, down 10% year-on-year
  • iPad revenue: $7.22 billion versus an estimated $6.94 billion, down 2% year-over-year
  • gross profit margin: 43.26% vs. 42.61% estimated

Apple did not provide official guidance for the quarter. Analysts expected the company to deliver last-quarter guidance of $1.31 in earnings per share and about $90 billion in sales.

“In terms of the overall outlook, we expect revenue to accelerate in the September quarter despite seeing some softer pockets,” Apple CEO Tim Cook told CNBC’s Steve Kovac.

Apple’s revenue was up 2% during the quarter, compared to 36% growth during the same period last year, and more than 8% growth in the March quarter. Cook said results were better than expected and Chief Financial Officer Luca Maestri said it was a “challenging operating environment”.

Chip makers and other computer vendors have indicated that there is a slowdown in demand for smartphones and computers around the world as consumers grapple with decades-old recession and high inflation fears. Apple’s weak growth may indicate that the consumer electronics industry – including leaders like Apple – is heading into a period of slow or no growth.

Cook told CNBC that the company is experiencing inflation but will continue to invest.

“We see inflation in our cost structure,” Cook said. “We see that in things like logistics, wages, some silicon components and we’re still hiring, but we’re doing it on a deliberate basis.”

Apple’s iPhone sales have exceeded Wall Street expectations, indicating that demand for iPhone 13 models remains strong even in the second half of the product’s annual release cycle. Apple usually releases new iPhones in September and sales drop as customers anticipate new models.

Cook said Apple managed to attract Android customers to become iPhone owners during the quarter.

“We had a record level of converters and saw double-digit growth of new iPhone customers,” Cook said.

The Services segment was Apple’s fastest growing segment during the quarter. They include monthly subscriptions, payment fees, warranties, Google search license fees, and revenue from the iPhone App Store.

Services grew more than 12% during the quarter, although this is down from the 17% growth it saw in the second quarter, and down from the 27% growth it recorded during the same time period last year.

Cook said Apple currently has 816 million paid subscriptions, including anyone who subscribes to an app sold on the Apple App Store as well as products like Apple Music and iCloud.

Mac sales were below consensus expectations and fell more than 10% year over year. This is due to supply constraints and the strength of the dollar, Cook said.

In April, Apple warned that parts shortages would affect revenue by $4 billion to $8 billion, and Apple’s website showed extended shipping times for several Mac models during the quarter. Cook said the final blow came in at less than $4 billion.

Apple also announced new MacBook Air models during June that didn’t begin shipping to customers until July. MacBook Air is Apple’s best-selling computer.

Apple’s iPad fell 2% annually, but beat Wall Street’s soft expectation, with iPad tablets being one of the product lines that analysts think Apple may prioritize away from tackling chip shortages. Cook said the iPad’s decline was also driven by supply constraints and a strong dollar.

Apple’s other product category, which includes headphones like AirPods, Apple Watch and HomePod, fell more than 8% year over year and missed Wall Street expectations.

Apple’s business in Greater China, which includes Taiwan and Hong Kong, fell 1% year over year to $14.6 billion. Cook said that result was despite major Covid restrictions hurting demand.

Apple’s gross profit margin exceeded the company’s expectations from April. Apple reported 43.26% of gross margin, above the 42% to 43% range the company proposed earlier this year.

Apple said it spent more than $28 billion on stock buybacks and dividends during the quarter.

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