Apple IPhone Sales Up 2% in June Quarter.; Mac, IPad, Wearables Down
Apple product constraints in the September quarter will be improved vs. the June quarter, but the company isn’t forecasting when the chip shortage will end, said CEO Tim Cook on a Thursday earnings call. On its April earnings call, Cook had warned of a $4 billion-$8 billion hit for the June quarter due to silicon shortages and COVID-19 factory shutdowns in China.
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For fiscal Q3 ended June 25, “we came in slightly below … the $4 billion number,” Cook said, saying most of the constraint came from China plants that closed and others running at less than full capacity. For the current quarter, Apple is “optimistic about the COVID restriction piece,” he said.
Apple recorded a record $83 billion in June quarter sales, up 2% year on year, said Chief Financial Officer Luca Maestri. IPhone sales set a June quarter record at $40.7 billion, up 3% vs. the year-ago quarter. The company set a June quarter record for switchers with double-digit growth, helping to expand the iPhone installed base, Cook said. The iPhone is also expanding in markets including Indonesia, Vietnam and India, where adoption doubled in the quarter, he said. With 5G penetration low globally, “there’s reason to be optimistic,” he said.
IPad revenue slipped 2% vs. the prior-year quarter to $7.2 billion due to supply constraints and negative foreign exchange rates. Mac, also hit by supply constraints, generated $7.4 billion, said Maestri. When COVID restrictions hit Shanghai, “we lost the primary source for Mac units,” Cook said.
Wearables, Home and Accessories revenue fell 8% year on year to $8.1 billion, on foreign exchange headwinds, launch timing and supply constraints, Maestri said. Cook referenced a “cocktail of headwinds” affecting the category in the quarter, including currency exchange rates, supply constraints and lost business in Russia. In addition, it didn’t have an AirTag launch this year, as it had in the ’21 June quarter.
Services revenue grew 12% to $19.6 billion, despite exchange rates, plus impact from business in Russia and the macroeconomic environment, Maestri said. He cited growth in paid subscriptions, which grew by 160 million over the past 12 months to 860 million. Digital advertising was affected by the macroeconomic environment, Cook said.
Maestri didn’t provide revenue guidance due to continued macroeconomic uncertainty, but he gave “directional insights” assuming economic and COVID-19-related impacts don’t worsen. Apple believes its year-on-year revenue growth will accelerate in the September quarter from June, despite a 600-basis point negative foreign exchange rate impact. Services will grow but at a lower rate from June on current headwinds, he said.
Commenting on where growth will come from as services mature, Maestri cited Apple’s installed base as the “engine for our company,” and that continues to grow, he said. Customers are “getting more and more engaged over time,” he said. On potential acquisitions, Cook said Apple would buy something that is “strategic,” not just to buy for revenue. “To date, we have concentrated on smaller IP and people acquisitions,” he said, “but I wouldn’t rule anything out for the future.”
On the need for affordable solutions to grow the Apple brand in emerging markets, Maestri said Apple is working on two initiatives: installment plans and trade-in programs. Trade-in programs are a “huge differentiator” because Apple products retain “much more value than other platforms.”
Addressing how Apple is preparing for economic uncertainty, Cook said Apple believes in investing through a downturn. “We’ll continue to hire people and invest in areas, but we are being more deliberate in doing so in recognition of the realities of the environment.” Shares closed 3.2% higher Friday at $162.47.