While Apple’s earnings were worse than analysts expected, AAPL investors were only temporarily spooked. At the time of writing, the stock has mostly been hovering around yesterday’s closing price, and is currently heading higher.
Aftermarket trading saw the stock initially drop 5%, but quickly recovered after CEO Tim Cook outlined the three reasons for the year-over-year decline in iPhone revenue…
Analysts were expecting revenue to decline year-over-year, and they were right. But the actual decline was larger than expected, at $117.15 billion versus $122.85 billion. That’s a 5% year-over-year decline, with an even bigger 13% drop in earnings.
- iPhone: $65.78 billion (compared to $71.63 billion)
- Mac: $7.74 billion (against $10.85 billion)
- IPAD: $9.40 billion (against $7.25 billion)
- Wearables, home and accessories: $13.48 billion (against $14.70 billion)
- Services: $20.78 billion (against $19.5 billion)
iPhone revenue of course got the most attention, down nearly 9% from a year earlier.
However, Tim Cook was quick to point out the three reasons. First, he said, the iPhone’s problem wasn’t demand, but rather the inability to keep up.
Challenges related to COVID-19 significantly affected iPhone 14 Pro and iPhone 14 Pro Max supply and continued for most of December. Because of these limitations, we had much less inventory of the iPhone 14 Pro and iPhone 14 Pro Max than we had planned, causing shipping times to extend far beyond what we had anticipated.
Secondly, a strong dollar means that although dollar The value of overseas sales has fallen, and domestic revenue has actually gone up.
On a constant currency basis, we’ve been growing year over year and would have grown in the vast majority of the markets we track.
Third, the broader economic environment.
The third factor was the challenging macroeconomic environment as the world continues to face unprecedented conditions from inflation to war in Eastern Europe and the lasting effects of the pandemic. And we know that Apple is not immune to it.
Looking ahead, Cook said the iPhone 14 supply issues have now been resolved.
Production is now back where we want it to be.
Photo: Jason Briscoe/Unsplash
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