Apple ekes out revenue growth on iPhone sales and services

Apple’s revenues grew slightly on the back of iPhone sales and its services division despite headwinds from supply chain shortages and factory shutdowns in China.

The iPhone maker said revenues had risen 2 per cent from a year ago to $83bn, slightly ahead of analysts’ forecasts for $82.8bn, according to Refinitiv.

Apple in April had warned of up to $8bn in setbacks related to supply and production issues for this quarter. But finance chief Luca Maestri told the Financial Times that supply and production headwinds ended up being less than $4bn, and in the current quarter the situation should be better.

“The situation on supply is improving,” he said. “The big question mark, as always, are potential Covid restrictions but in the current environment, if nothing changes, we expect supply constraints to be less than what we saw in June.”

Earnings per share last quarter fell 8 per cent to $1.20, beating forecasts for $1.15. Net profit fell 10 per cent to $19.4bn, above forecasts of $19bn.

Apple shares rose about 3 per cent in after-hours trading.

“Credit should be given to (chief executive Tim Cook) for the way he has led this company over the last couple of years,” said Paolo Pescatore, analyst at PP Foresight. “The company is very well placed to weather any storm, in stark contrast to others.”

The tech giant said iPhone sales, which accounted for 49 per cent of overall revenue, rose 3 per cent to $40.7bn.

Maestri noted that Apple generated almost $23bn in operating cash flow and returned more than $28bn to shareholders through dividends and share buybacks.

Apple’s “installed base of devices” — which include iPhones, iPads and other hardware — reached an all-time high for “all major product categories”, Maestri said, although he declined to update the number from the 1.8bn reported in January.

That helped revenue at Apple’s Services — a high-margin division which houses the App Store and digital media purchases — increase 12 per cent to $19.6bn, slightly below expectations for $19.7bn.

“On iPhone, we haven’t seen any sign of demand weakness from the macro environment other than foreign exchange,” Maestri said. “We believe demand continues to be very strong but we don’t have enough supply to satisfy that demand.”

“Where we’ve seen some level of weakness from the macro environment is the wearables home and accessories category,” he added.

Analysts at Bernstein had previously warned that fiscal year 2023 revenue estimates might be too high. “Apple is consumer-centric, and is highly transactional, with less than 10 per cent of its revenues and profits being recurring — meaning it could be vulnerable to a downturn,” they wrote.