Apple released its second quarter financial year results, which is everyone else’s first quarter calendar year, and it’s kind of what you would expect – life is good, we are Apple, macroeconomics may have splashed some mud on our shoes but you can’t even notice now, we are so bright and shiny.
Let’s be clear about one thing, the stock market was kept happy because Apple did a very good job of maintaining profits, managing its product mix, and is returning about $90 billion to its investors and upping dividends. That’s all there was to the briefing after the numbers were released.
The only thing I can add is that at the same time as this is happening, Qualcomm was taking a beating because its sales of chips for iPhones were down for Q1’23 (MarketWatch calls it backed up inventory on Apple’s part), also at the same time, Omdia shows shipments of Apple smartphones dropped 23.5% in the first quarter of 2023 compared to the last quarter of 2022. So, did Apple fill up channels and inventories, and push product? It’s a legitimate retail strategy, and if the second half of this year picks up, Apple’s suppliers will get over the hurt, but if the second half doesn’t pick up, well, we all know what happens when inventories back up.
As for the company’s earnings call, slick and professional, although you could sense from the tone of the presentations that everyone was putting on their happy face. That’s a little different to having a real happy face. Make of that what you will. It seems pointless to begrudge the world’s richest company a few moments of nervousness and anxiety as it tries not to disappoint Wall Street. There’s probably some thing about Apple needing to keep some sort of aura of invincibility, aloofness if you will, that means it can’t afford to have anything be bad or sad or down.
Yet, overall revenue decreased by 3% YoY for the company, but the Services segment grew with an increase of 5.47%. None of that matters when the big talking point is phones, and there, Apple generated $51.3 billion in sales from the iPhone in its Q2’23, surpassing analyst predictions of $49 billion. Phew. Although sales have declined for two consecutive quarters, something unheard of for Apple since its second coming, iPhone sales in the Chinese market seems to be warming the hearts of .analysts who view the region as a tough nut to crack for US businesses. The myth of Apple’s invincibility continues.
Additionally, time was given to that other populous nation, India, rapidly creating potential new Apple stans. CEO Tim Cook praised India’s growing middle class, stating that the country is at a tipping point and noting the market’s vibrancy and dynamism. Apple aims to accelerate growth in India and tap into its immense labor pool, exploring ways to reduce reliance on China amid escalating tensions between Washington and Beijing. Apple’s longtime partners have been rapidly expanding assembly lines in India over the past year as Apple opened its first two retail outlets in the country last month, highlighting its commitment to the market. Also, Apple posted nearly $6 billion in sales in India during the year through March.
Apple’s Most Recent Quarterly Financials
Apple announced its financial, as opposed to calendar, Q2’23 financial results, showing a slight decrease in revenue compared to the same quarter in the previous year.
Key Highlights:
- Quarterly revenue for Q2’23 stood at $94.8 billion, representing a 3% decrease YoY.
- Services revenue rose 5.5%, to $20.9 billion.
- iPad revenues were $6.7 billion.
- Increase of 150 million to 975 million paid subscribers for digital services.
- Wearables, home, and accessories achieved sales of $8.8 billion.
- Apple achieved an all-time record in Services and a March quarter record for iPhone sales.
- The company’s installed base of active devices reached an all-time high, despite a challenging macroeconomic environment.
Apple’s CEO, Tim Cook, expressed satisfaction with the company’s performance, emphasizing its commitment to long-term investments and maintaining its values. This includes substantial progress towards achieving carbon-neutral products and supply chains by 2030.
Apple’s CFO, Luca Maestri, reported an improvement in the company’s YoY business performance compared to the December quarter. Apple generated a strong operating cash flow of $28.6 billion, returning over $23 billion to shareholders during Q2’23. The board has authorized an additional $90 billion for share repurchases, reflecting confidence in Apple’s future and the value of its stock.
| (in millions of dollars) | Q2’23 | Q2’22 | 1H23 | 1H22 |
| Net sales: | ||||
| Products | 73,929 | 77,457 | 170,317 | 181,886 |
| Services | 20,907 | 19,821 | 41,673 | 39,337 |
| Total net sales | 94,836 | 97,278 | 211,990 | 221,223 |
| Cost of sales: | ||||
| Products | 46,795 | 49,290 | 107,560 | 113,599 |
| Services | 6,065 | 5,429 | 12,122 | 10,822 |
| Total cost of sales | 52,860 | 54,719 | 119,682 | 124,421 |
| Gross margin | 41,976 | 42,559 | 92,308 | 96,802 |
| Operating expenses: | ||||
| Research and development | 7,457 | 6,387 | 15,166 | 12,693 |
| Selling, general and administrative | 6,201 | 6,193 | 12,808 | 12,642 |
| Total operating expenses | 13,658 | 12,580 | 27,974 | 25,335 |
| Operating income | 28,318 | 29,979 | 64,334 | 71,467 |
| Other income/(expense), net | 64 | 160 | -329 | -87 |
| Income before provision for income taxes | 28,382 | 30,139 | 64,005 | 71,380 |
| Provision for income taxes | 4,222 | 5,129 | 9,847 | 11,740 |
| Net income | 24,160 | 25,010 | 54,158 | 59,640 |
