Apple expects faster sales growth, strong iPhone demand despite dismal economy

(Reuters) – Apple Inc (AAPL.O) said Thursday that parts shortages are easing and demand for iPhones is not stopping despite consumers tightening other spending, helping it to beat Wall Street expectations and anticipate faster sales growth in the future. .

Shares of the Silicon Valley giant rose 2.6% hours after the results were announced. Apple said it was not providing specific revenue guidance due to economic uncertainty.

Although macroeconomic indicators around the world are turning negative, Chief Financial Officer Luca Maestri told Reuters there has been no slowdown in iPhone demand. The iPhone maker’s loyal and relatively affluent customer base has weathered declines better than other consumer brands in the past, and Apple’s fiscal third-quarter results suggest a similar pattern has emerged.

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“Apple in this sense has a certain strength that allows it to be influenced to a lesser extent than many of its competitors,” said Canalys Research Analyst Runar Björhovede.

Apple’s Maestri said in an interview that the sluggish economy is hurting sales of advertising, accessories and home products, describing the units as “pockets of weakness.”

“Fortunately, we have a very broad portfolio, so we know we’ll be able to handle that,” he added.

Maestri said parts shortages will continue to limit sales of Macs and iPads, although the impact is easing. They cost Apple less than $4 billion in sales in the quarter ending June 25, less than it expected. Maestri said the company expects the hit to diminish further in the current quarter.

Maestri said sales compared to a year ago should rise faster in the current quarter than the 2% growth they had in the quarter just ended.

Overall, Apple said quarterly sales and earnings were $83.0 billion and $1.20 per share, above estimates of $82.8 billion and $1.16 per share, according to Refinitiv data.

While iPhone and iPad sales beat expectations, revenue from services, Mac computers and accessories missed Wall Street’s targets and sales in the crucial Chinese market fell 1%.

The rise of the US dollar has affected many companies such as Apple that generate significant foreign revenue and get less cash when transferred. Apple said currency fluctuations will reduce sales by 6% in the current quarter.

The latest economic problems include supply chain disruptions that have affected production of some Apple products, such as iPads and Macs that have had assembly sites near areas of China that have been closed due to COVID.

Apple, like many of its tech peers, is reported to be slowing hiring and cutting costs given the challenging economic climate. Read more

Apple shares closed Thursday down about 11% so far this year, just below the broader S&P 500 (.SPX) and also lower than other consumer device makers like Sonos Inc (SONO.O) and Samsung Electronics Co (005930.KS) .

Apple said iPhone sales came in at $40.7 billion, up about 3% from the previous year and well ahead of the overall global smartphone market, which was down 9% during the quarter just ended, according to Canalys data.

Growth in the company’s services business, which has provided a boost to sales and profits in recent years, was 12%, down from the previous year’s rate of 33%, generating $19.6 billion in revenue, below estimates of $19.7 billion.

Apple said it now has 860 million paid subscribers on its paid services or for paid software in its App Store, up from 825 million in the previous quarter.

iPad and Mac sales were $7.2 billion and $7.4 billion, compared to estimates of $6.9 billion and $8.7 billion. Mac sales represented a 10% contraction, following record sales since 2020, first from the boost to work from home and then from Apple’s new processor chips.

In its most recent fiscal year, nearly a fifth of Apple’s sales came from the Greater China region after two years of faltering sales there. But Apple is now facing slow overall economic growth in China, with fiscal third-quarter sales of $14.6 billion, down 1%.

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(Additional reporting by Steven Nellis, Nivedita Ballou and Parrish Dave) Editing by Peter Henderson and Lisa Shumaker

Our Standards: Thomson Reuters Trust Principles.

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