During a summer quarter when most other large tech businesses saw their fortunes decline, Apple was able to increase both its sales and earnings, but it doesn’t necessarily imply the iPhone manufacturer will be immune to a prospective recession.
Even while Apple performed pretty well, the July-September results made it clear that the most valuable firm in the world is dealing with some of the same economic challenges that have severely hurt Microsoft’s and the financial performance of Google and Facebook.
Apple’s fiscal fourth quarter revenue increased to $90.1 billion, up 8% over the same period in 2017.
That was an improvement above the meager 2% increase in revenue during the company’s April to June quarter, when supply issues brought on by pandemic-related manufacturing closures hurt sales.
The Cupertino, California-based company’s quarterly earnings came to $20.72 billion, or $1.29 per share, up little under 1% from the same period in 2017.
The sales and earnings per share were both little higher than expected by analysts.
However, sales of Apple’s most well-known product, the iPhone, as well as another significant revenue generator, and the services sector, were both lower than experts had predicted — an indication that customers may be making adjustments in the midst of the biggest inflation in 40 years.
In a conference call with investors on Thursday, Apple CEO Tim Cook recognized that the economy is becoming “increasingly tough.”
“Many people are struggling in many locations.”
Despite the fact that this year’s third quarter will have one extra week than last year’s, Apple’s Chief Financial Officer Luca Maestri warned during a conference call that these difficulties are among the reasons the company anticipates its revenue growth to slow down during the current October-December period.
The expected downturn is also being exacerbated by the strong dollar, which has reduced Apple’s reported sales abroad.
After Maestri’s projection, investors first responded unfavorably, dropping Apple’s shares by around 3% in extended trade, but by the time management closed the call, they appeared to be feeling more bullish about the company’s future.
Late on Thursday, Apple’s stock was up more than 1%.
Similar to other formerly high-flying tech firms, Apple’s shares has fallen by roughly 20% thus far in 2022.
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Even if the business didn’t sell exactly as many iPhones as experts had anticipated over the prior quarter, the gadget remains Apple’s flagship product 15 years after its introduction.
Sales of iPhones increased 10% to $42.63 billion in late September as a result of the introduction of four new models.
However, as customers begin to feel the pinch of the previous year’s stubbornly high inflation rates, industry analysts are beginning to worry about how much longer consumers will splurge on new phones.
If such financial challenges continue, more people could decide to limit their Christmas spending, especially on the type of expensive devices that serve as Apple’s mainstay.
It’s for this reason, among others, that the research company International Data Corp. has revised its prior projection from May to predict that global smartphone shipments would decline by 6.5% from 2021 this year, which translates to the sale of nearly 150 million fewer handsets.
IDC anticipated that although Apple won’t be as negatively impacted as manufacturers of smartphones with Google’s Android operating system, there would still be a sizable slowdown.
According to IDC, iPhone shipments will increase by less than 0.5%, with the device’s average selling price remaining at roughly $950.
Sales of iPhones are up 6% from last year through the first nine months of this year.
According to Investing.com analyst Jesse Cohen, “We knew Apple’s iPhone business was slowing down, but we’re also starting to see it leak into their services area, which will be one cause for concern.”
Maestri informed analysts that the services division’s last quarter was most negatively impacted by declining revenues of gaming and advertising.