Apple reports better-than-expected quarter driven by iPhone sales

Apple reported second-fiscal quarter earnings on Thursday that beat Wall Street’s soft expectations for sales and revenue, driven by stronger-than-anticipated iPhones sales. Apple CEO Tim Cook told CNBC that the quarter was “better than we expected.” 

However, Apple’s overall sales fell for the second quarter in a row.  Apple shares rose less than 1% in extended trading.

Here’s how the company did versus Wall Street expectations per Refinitiv consensus expectations: 

• EPS: $1.52 vs. $1.43 expected 
• Revenue: $94.84 billion vs. $92.96 billion expected 
• Gross margin: 44.3% vs. 44.1% expected 

Apple reported $24.16 billion in net income during the quarter versus $25.01 billion last year. Overall revenue was down 3% from last year’s $97.28 billion in sales.

Here’s how Apple’s individual product lines did versus StreetAccount consensus expectations: 

• iPhone revenue: $51.33 billion vs. $48.84 billion expected 
• Mac revenue: $7.17 billion vs. $7.80 billion expected 
• iPad revenue: $6.67 billion vs. $6.69 billion expected 
• Other Products revenue: $8.76 billion vs. $8.43 billion expected 
• Services revenue: $20.91 billion vs. $20.97 billion expected 

Apple didn’t provide formal guidance, continuing its practice that dates back to 2020 and the start of the Covid-19 pandemic. Management typically provides some data points on a call with analysts.

The highlight of Apple’s report was iPhone sales, which grew from the year-ago quarter even as the broader smartphone industry contracted nearly 15% during the same time, according to an IDC estimate.  

IPhone revenue grew 2% during the quarter, suggesting that parts shortages and supply chain issues that had hampered the product for the last few years, including an iPhone factory shutdown late last year, had finally abated.  

“It was quite a good quarter from an iPhone point of view, particularly relative to the market when you look at the market stats,” Cook told CNBC’s Steve Kovach.  

Apple’s Mac and iPad businesses didn’t fare as well. The company warned last quarter that both business segments would decline, partially due to parts shortages, but they decreased more than expectations.  

Apple’s Mac business fell more than 31% to just over $7.17 billion. But it’s a difficult comparison versus the same time last year when Apple was still benefiting from the end of a pandemic boom in PC sales and a shift to its own chips that offer longer laptop battery life.  

“There’s really two reasons for that,” Cook said. “One is the macro situation in general. And the other is where we’re still comparing to the very difficult compare of the M1 MacBook Pro 14 and 16-inch from the year-ago quarter.” 

Revenue from iPads declined nearly 13% to $6.67 billion.  

Apple’s Services business includes monthly subscriptions, revenue from Apple’s App Store, warranties, and search licensing revenue from companies like Google. Apple reported $20.9 billion in services revenue, a 5.45% annual increase, showing that the company’s most highest-margin line of business continues to grow.  

Apple’s wearables division, including Apple Watch and headphones such as AirPods, dropped 1% during the quarter, beating analyst expectations. Last fall, Apple released a more expensive Apple Watch, called Ultra.  

Apple’s greater China business, which includes Taiwan and Hong Kong in addition to the mainland, reported $17.81 billion in sales, down from last year’s $18.34 billion. Analysts had hoped that China’s demand for electronics would rise this year as the company exits out of Covid-era lockdowns and other restrictions.  

While sales shrunk in most regions that Apple monitors, they grew in its Asia Pacific region to $8.11 billion.

Cook was optimistic about Apple’s prospects in India. Cook visited India last month to open Apple stores and meet with politicians.  

“The switcher and first-time buyer metrics look very good there for India,” Cook said. Apple uses the term “switcher” to refer to first-time iPhone buyers who previously had Android devices.  

As expected, Apple’s board authorized $90 billion in share repurchases and dividends. Apple said it paid $23 billion in buybacks and dividends in the March quarter. Apple also raised its dividend 4% to 24 cents per share.  

Cook also said that Apple was not planning layoffs like those that other big tech companies have started over the past year.  

“I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” Cook said.