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Apple Q3 revenue flat; Services up 8%

August 4, 2023

Apple has announced financial results for its fiscal 2023 third quarter ended July 1st 2023. The Company posted quarterly revenue of $81.8 billion (€74.7m), down 1 per cent year over year, and quarterly earnings per diluted share of $1.26, up 5 per cent year over year.

Revenue has declined for multiple quarters for the tech giant as Mac and iPad sales have lagged. Apple CFO Luca Maestri said the company expects revenue for these products to fall by double digits from last year, citing pent-up demand from the prior year quarter after factory shutdowns.

Services was a healthier segment for Apple, rising 8 per cent from the year-ago period to an all-time high. The company also beat expectations for overall revenue and earnings per share.
“We are happy to report that we had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone,” said Tim Cook, Apple’s CEO. “From education to the environment, we are continuing to advance our values, while championing innovation that enriches the lives of our customers and leaves the world better than we found it.”“Our June quarter year-over-year business performance improved from the March quarter, and our installed base of active devices reached an all-time high in every geographic segment,” added Maestri. “During the quarter, we generated very strong operating cash flow of $26 billion, returned over $24 billion to our shareholders, and continued to invest in our long-term growth plans.”

According to Jeremy Goldman, senior director of briefings, Insider Intelligence, Apple’s earnings report underscores its strategic shift towards services as a core offering. Services (up 8 per cent), including advertising, are far more profitable than physical goods it has built its reputation on. And the company’s foray into financial services is a testament to consumers’ love for the brand, with its high-yield savings account reaching $10 billion in deposits since its April launch.”

“The company continues to face headwinds caused by waning growth in the smartphone market. Given their high prices, consumers expect quite a lot from these devices, and while Apple continues to deliver high-quality products, it’s becoming increasingly difficult to entice customers to replace their devices as frequently.”

“Furthermore, the absence of a clear vision for the next billion-dollar business raises some questions about the long-term implications of this strategy. Some of the company’s more recent ventures, such as Apple Card and Apple TV, have been more of a mixed bag rather than unmitigated successes, suggesting that the company might be focusing more on optimising revenue around the edges rather than on groundbreaking innovation. While these moves may boost short-term growth, the key to sustained success will be Apple’s ability to marry these new ventures with transformative innovation that has been the company’s hallmark.”

“All eyes are now on its earnings call for any potential Vision Pro or AI-related announcements that could further push the boundaries of their business model,” he concluded.

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