Apple Stock Rallies On Better-Than-Feared Q3 Results: What Investors Need To Know

Zinger Key Points
  • Apple reported better-than-expected iPhone sales that led to above-consensus results for a difficult quarter.
  • Services contribution to total revenue increased.
Apple Stock Rallies On Better-Than-Feared Q3 Results: What Investors Need To Know

Apple Inc AAPL reported Thursday after the close better-than-expected fiscal-year third-quarter results, helped by strong iPhone and iPad sales.

The installed base of active devices once again hit a record, underlining the company’s strong product traction despite the economic uncertainties. Margins slipped sequentially, reflecting the supply chain challenges.

Apple’s Key Q3 Numbers: Apple’s third-quarter earnings per share (EPS) came in at $1.20, down from $1.30 per share a year ago. Sequentially, the bottom line fell about 21% from the June quarter’s $1.52.

Revenue rose 2% year-over-year but fell about 14.7% quarter-over-quarter to $83 billion. The year-over-year growth tapered off to the slowest pace of growth since 2020 but marked a record revenue performance for the June quarter.

Analysts, on average, estimated EPS of $1.16 on revenue of $82.6 billion.

Third-quarter gross margin was at 43.3%, flat with the year-ago period. The metric, however, contracted from the previous quarter’s 43.7%.

Ahead of the earnings report, Bloomberg’s Mark Gurman said Cupertino’s problems go beyond the economy. He flagged supply-chain challenges, tougher comparisons and the delay in the availability of the latest MacBook Pro as potential deterrents.

For almost much of April, most parts of China, including Shanghai, were under strict lockdowns to abide by the nation’s zero-COVID policy. A majority of Apple’s suppliers have factories in the affected regions, bringing their production to a standstill.

Apple was factoring in a supply chain impact of $ 4 billion to $ 8 billion for the quarter.

“Our June quarter results continued to demonstrate our ability to manage our business effectively despite the challenging operating environment,” said Luca Maestri, Apple’s CFO.

“We set a June quarter revenue record and our installed base of active devices reached an all-time high in every geographic segment and product category.”

Apple generated $28 billion in operating cash flow during the quarter.

The share of Services revenue to the total increased both year-over-year and sequentially to 30.9%, while products contributed 76.4%.

Apple Segmental Performance – By Products: Apple saw year-over-year revenue growth for iPhones and Services, while Mac, iPad and Wearables, Home & Accessories reported declines. Sequentially, the revenue of all product categories and Services fell, with iPhone and Mac seeing the steepest declines.

iPhone revenue of $40.67 billion bettered the $39.2 billion forecast of Rosenblatt Securities analyst Barton Crockett. Mac sales of $7.38 billion trailed the analyst’s $8.6 billion estimate.

Commenting on the results, Loup Funds analyst Gene Munster said, "Impressive results. Apple beat the iPhone by 5% which surprised me given the discounting in China. Also a sign of how dependent the world is on the iPhone,"

Apple Segmental Performance – By Geography: Apple witnessed sub-5% year-over-year growth in the Americas and Europe. The rest of Asia-Pacific saw high-double-digit growth, while Greater China witnessed a modest drop and Japan reported about a 16% decline.

Compared to the March quarter, all regions saw sharp declines.

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Related Link: Why Apple Should Consider Building Its Own Assembly Supply Chain

Apple’s Shareholder Returns: Apple’s board announced a dividend of $0.23 per share, payable on August 11, to shareholders on record as of August 8.

The company noted that it returned $28 billion to its shareholders

Forward Outlook: For the September quarter, analysts, on average, expect EPS of $1.31 on revenue of $90 billion. The quarter is the second-busiest one for the company, given it encompasses the back-to-school period.

For the fiscal year ending September 2022, EPS and revenue are expected at $6.13 and $393.47 billion, respectively.

Apple Price Action: Cupertino’s stock has shed about 11.5% in the year-to-date period. This compares to the 15.6% drop by the S&P 500 Index and the 23% plunge by the tech-heavy Nasdaq Composite Index.

In after-hours trading on Thursday, Apple stock was trading 2.67% higher at $157.35, according to Benzinga Pro data

Posted In: Barton CrockettGene MunsteriPhonesLoup FundsRosenblatt SecuritiesEarningsNewsGlobalTop StoriesAfter-Hours CenterTechMedia