Apple Outperforms in Q3 2022 Despite a Rocky Road
Reporting at the tail-end of an inflationary surge and with the United States having just hit the dictionary definition of recession, Apple announced financial results for its third fiscal quarter of 2022: profits of $19.44 billion ($1.20 per diluted share) on revenues of $83.0 billion. Although the company’s revenues were up 2% compared to the year-ago quarter, its profits were down by 10% (see “Apple’s Q3 2021: Still Making Money Hand Over Fist,” 27 July 2021).
As has been the case for many years, the iPhone dominated Apple’s revenue sheet but represented slightly less than half of Apple’s overall Q3 2022 revenue. Apple’s fast-growing Services sector now makes up nearly a quarter of Apple’s business.
The worldwide revenue story was mixed. The Asia/Pacific region was a standout, with revenue increasing by 14%, but a 15.7% downturn in Japan countered that bright spot. Both the Americas and Europe recorded increased revenues—4.5% and 1.8%, respectively—while revenues from China declined slightly by 1.1%.
Finally, unlike Google, with its two-week hiring freeze, Apple is still hiring, even though CEO Tim Cook said Apple is “being more deliberate in doing so.”
The iPhone was one of Apple’s two growing product lines, with sales up 2.77% over last year’s June quarter, bringing in $40.7 billion in revenue. To put that in perspective, iPhone sales in Q3 2021 saw an enormous year-over-year leap, and the third-quarter results from the past two years have been the strongest since we began tracking iPhone revenues in 2012.
iPad sales fell 1.95% compared to last year but still managed to tally $7.2 billion in revenue. The Q3 sales record for iPad remains $9.2 billion in 2012—the first year in our chart below. Revenues fell sharply the next year to $6.4 billion and continued falling to a 2015 low of $4.5 billion before puttering along for another few years. But iPad sales jumped in Q3 2020 and have been steady ever since, so, despite this small year-over-year dip, iPad sales remain in solid shape even given the category’s short-term supply issues.
Mac sales plummeted 10.36%, which Cook largely blamed on supply constraints, with new device deliveries backordered by weeks or months, with foreign exchange issues contributing to the drop. But while the Mac story may seem gloomy in the short term, more than half of Mac sales went to first-time users. Couple that with the new M2 Macs beginning to enter the market, and Mac sales prospects look bright. Despite the dip, as you can see below, the Mac’s Q3 2022 was in line with its Q3 2020 sales, and in terms of sales, the past three years have been the Mac’s strongest ever.
The Services sector—unconstrained by supply issues—was Apple’s golden child this quarter, increasing by 12.11%, thanks to iCloud+, Apple TV+, and Apple Music. Apple’s services ambitions continue to grow—during the quarterly investor call, CFO Luca Maestri called digital advertising a “pocket of weakness” that Apple hopes to fill profitably. Also, although critical plaudits don’t directly correlate with revenues, Tim Cook jubilantly announced that Apple TV+ shows have received 52 Emmy nominations. We’re still surprised Apple hasn’t bolstered Services revenue with an iCloud Time Machine service that would require an iCloud+ subscription (see “Five Enhancements for Future Apple Operating Systems,” 19 May 2022).
The wearables category—which includes the Apple Watch, AirPods, Beats products, and various accessories—took a hit of 7.87%. Apple Watch sales were strong within the category, with two-thirds of purchasers new to the device. The Q3 2022 Wearables performance still towers over the relatively strong performance of Q3 2020.
Despite what Cook called a “time of significant challenge around the world,” Apple beat analyst expectations, and its stock rose in after-hours trading. “This quarter has been a reflection of our resilience and our optimism,” he said. Now to see how the company fares in Q4.
I would have expected Apple is always very “deliberate” when it comes to hiring.
It was interesting – Tim Cook said something in the phone call that indicated that the supply issues were really bad early on in the quarter but then recovered a bit.
I would have bought a new Mac but there were no 27” ones on offer.
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