reported record earnings in the September quarter, continuing a pandemic-induced streak that investors have been closely watching amid sluggish demand for certain consumer goods.
The Cupertino, Calif., company announced its full-year earnings on Thursday after the markets closed. So far, Apple’s business has remained strong in the face of a broader slowdown in smartphone sales and global economic challenges.
“It’s better than we expected at the beginning of the quarter,” Apple Chief Financial Officer Luca Maestri said in an interview. According to him, the change of the currency had a negative impact on the company. The value of the dollar has risen against other currencies this year, affecting the results of multinational corporations.
In the quarter ended in September, iPhone sales increased by 9.7% compared to the previous year and amounted to 42.6 billion dollars. Analysts had expected iPhone sales to reach $43 billion, according to FactSet. The iPhone continues to account for about half of the company’s total revenue.
Apple’s total revenue rose 8% year over year to $90.1 billion, beating analysts’ estimates for the July-September period. Net income for the quarter was $20.7 billion, a record.
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Chief Executive Tim Cook said in July that the company has yet to see evidence in its internal data that macroeconomic headwinds are affecting iPhone sales.
Apple’s other tech giants are seeing significant slowdowns. Earlier this week, Microsoft Corp.
Google and Facebook are the parent Meta Platforms Inc.
all reported disappointing earnings, citing factors such as softening consumer demand for PCs or weakness in digital advertising.
Last month, Apple announced its latest lineup of smartphones with the iPhone 14, which includes two low-cost entry-level models as well as two premium versions of the Pro-spec phone. Analysts had expected weakness in the flagship models as consumers gravitated towards Pro models equipped with significantly better cameras and chips.
According to JP Morgan analyst Samik Chatterjee, the latest iPhone Pro models are estimated to account for 60% of total iPhone 14 sales. Previously, he said the iPhone 12 and 13 generations were more evenly split between the base and Pro models.
Mr Maestri said supply was limited due to strong demand for the iPhone 14 Pro models. “We’re working as hard as we can to meet the level of demand we’re seeing,” he said. The company is also dealing with supply constraints for the Apple Watch Ultra due to high demand, Mr. Maestri said.
Strong Pro sales were expected to offset potential weakness in overall iPhone sales by boosting the average selling price for Apple’s iPhone. Ever since the introduction of the Pro model line in the 2019 iPhone 11 generation, iPhone buyers have gradually become more aligned with Apple. Also, with the arrival of 5G in late 2020, US consumers were willing to pay the premium.
According to Consumer Intelligence Research Partners, the average selling price of the iPhone rose from $783 in the September quarter of 2019 to $954 in the company’s June quarter.
Revenue from Apple’s services business was $19.2 billion, up nearly 5% from a year ago. In the previous quarter, service revenue growth slowed to 12% compared to the same quarter a year ago.
Mr. Maestri said the service slowdown was due to foreign currency effects, as well as delays in digital advertising and games.
Investors have been concerned about the slowdown in its services business, which is an important area for Apple to diversify its business as the iPhone becomes a more mature product. Some analysts see Apple’s services business as an early indicator of consumer demand before it shows up in iPhone sales.
Earlier this week, Apple raised the price of its Apple Music and Apple TV+ streaming services, which could boost the service’s revenue for the current quarter.
Sales from Greater China in the September quarter rose 6% to $15.5 billion, compared with the $15.1 billion analysts expected. Analysts were concerned about the strength of Apple’s business in China as more Covid-related lockdown measures continue in the country.
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