Interpretation of Apple’s Q3 financial report: everyone is down on me and I am independent

Apple’s slowdown in growth stands out against the backdrop of a declining market as a whole.

Two days ago, Google and Microsoft took the lead in releasing their third-quarter financial reports. The former’s revenue growth rate was only 6% year-on-year, while the latter’s year-on-year growth rate was 10.6%. Both profits declined by double-digits year-on-year. After the earnings report was released, the shares of both companies fell nearly 8%.

Amazon and Meta are even more bleak. After the release of Amazon’s earnings report, the stock price collapsed by 16%, creating the largest one-day decline since 2006; Meta plummeted by 24%, and its market value shrunk to less than $350 billion, even compared to Amazon’s $1.13 trillion. , not to mention the $2.4 trillion Apple.

Early this morning, Apple released its fourth quarter report for fiscal 2022 (the third quarter of this year). The overall revenue reached a record $90.1 billion, an increase of 8% year-on-year, and a profit of $24.9 billion, a year-on-year increase of 4.7%, slightly exceeding the analysis. teacher expectations.

Even so, Apple’s stock price fell by more than 3% after the earnings report, and more of it may be bearish on the overall environment. Apple CFO Luca Maestri said in an interview :

This is better than we expected at the beginning of last quarter.

Maestri further noted that currency fluctuations negatively affect Apple as well as all multinational companies. Take Japan as an example. Last month, Apple announced that its products will increase the price of its products in the Japanese market, including a 20% increase in the price of the iPhone 13.

In fact, this is better than most people think, and WSJ also gave Apple two words: toughness.

In the cold winter of mobile phones, Apple is thriving

According to the global and Chinese smartphone market report recently released by market analysis agency Canalys, global market shipments fell by 9% year-on-year, which is equivalent to selling more than 60 million units less, which is also the worst third-quarter performance since 2014; It is down 11% year-on-year, and there are only 70 million units left.

Global mobile phone market Q3 report, Figure / canalys

Apple has clearly resisted the pressure, and its global market share has increased from 15% in the same period last year to 18%, the fastest growth rate among the top five mobile phone manufacturers. In the Chinese market, in addition to the 36% year-on-year increase in Apple’s shipments, Xiaomi, OPPO, vivo and Honor all experienced double-digit declines, with OPPO declining the most, reaching 27%.

However, the shrinking of the entire Chinese mobile phone market still affects the global performance of the iPhone. The previous fastest-growing Greater China region recorded a growth of only 6.2% last quarter. In contrast, Apple achieved explosive growth of 22.7% year-on-year in the Asia-Pacific market and 8.1% in the Americas.

According to data from the US Consumer Intelligence Research Institute, the average selling price of the iPhone in June this year has risen from $783 (about 5,664 yuan) in September 2019 to $954 (about 6,901 yuan).

Rising prices and outperforming sales figures are pushing up iPhone revenue.

According to the financial report, the sales revenue of the iPhone is still the largest of Apple’s overall revenue, accounting for 47%. Even on the basis of a 39% increase in the same period last year, iPhone revenue in the third quarter of this year still rose 9.7% year-on-year to $42.6 billion.

Apple’s revenue structure in the fourth quarter of fiscal 2022, Figure / TidBITS

But the iPhone is not without problems. According to various reports, the newly released iPhone 14 and iPhone 14 Plus have not performed well in sales, and there are also concerns in the supply chain that Apple is cutting orders. Analysts at JPMorgan Chase estimate that the iPhone 14 Pro/Pro Max will account for 60% of the total sales of the current 14 series, knowing that the starting prices of the two are as high as 7,999 yuan and 9,999 yuan, respectively.

It is not incomprehensible. In order to open up the difference between the Pro version and the standard version, Apple not only used the previous generation A15 chip in the standard version, but also the screen refresh rate has not followed the mainstream 120Hz, and even the appearance has not changed. to the Standard Edition.

Based on past experience, changes in the design of the new iPhone are often the key to consumers’ decision to buy. Unlike the media, ordinary consumers are more concerned about those more intuitive changes, and are more willing to “take my money” for it.

This isn’t the first time Apple has had trouble selling the standard version, especially since Apple decided to stop releasing just two iPhones a year, starting with the iPhone X. When it comes to the iPhone 12, it has released four models at a time: 12 mini, 12, 12 Pro, and 12 Pro Max.

Everyone knows the story later, the mini model was cut off due to poor sales performance.

Mac and iPad: Two blooms, one for each watch

Another major growth driver for Apple last quarter was its computer business. Compared with the iPhone, the Mac and iPad account for a small proportion of Apple’s overall revenue, but they also account for 21%. However, there is a big difference between the two in terms of revenue performance.

The first is the appeal of the Mac to users. Benefiting from the product competitive advantage brought by M-series chips, Mac directly brought in $11.5 billion in revenue last quarter, an increase of 25% year-on-year. The other key is that nearly half of the new Mac users are new, rather than upgrading from old Mac products. Apple also said that another reason for the growth of the Mac business was an improvement in demand and supply that had been backlogged by production problems.

By contrast, like the smartphone market, other players across the PC market are experiencing continued volatility, including Microsoft, which warned investors on its earnings call that “weak computer demand will continue to impact the performance of the Windows business.”

Additionally, Apple is expected to release updated versions of the 14-inch and 16-inch MacBook Pros in the coming weeks.

iPad, Figure / Apple Inc.

The iPad business, which released new products earlier this month, did not perform well, with revenue again falling 13.1% year-on-year to $7.1 billion. Cook said on the conference call that it was primarily a production issue rather than demand for the iPad, and that the iPad’s release from September to October has also affected sales over the past three months.

Meanwhile, news this week from The Information pointed out that Apple has plans to launch a 16-inch version of the iPad Pro, which will be released in the fourth quarter of next year.

This once again confirms Apple’s idea of ​​the two product lines of Mac and iPad. From the launch of iPadOS, it can be clearly seen that Apple wants to gradually bring iPad and Mac closer – the unification of chip architecture, the convergence of UI and functions, including the recent The “Pre-stage Scheduling” function. In terms of size, in addition to the 16-inch MacBook Pro, the 16-inch iPad is also coming.

It’s not like the Mac and iPad are merging. I believe that before the ecology is unified, the two product lines will be parallel for a long time, but the integration between them is what Apple is already doing.

Apple’s next growth miracle

Apple started the process of service transformation in 2016, and today the revenue of the entire service business has been equal to Mac+iPad, accounting for 21%. However, the 5% year-on-year growth rate in the last quarter is obviously not ideal, especially considering that the number of paid subscriptions on Apple’s platform has exceeded 900 million. Apple’s explanation is the increase in content licensing costs. For this reason, Apple Music and TV+ have been raised this week. subscription price.

Not only that, but this week Apple also added two important advertising spots in the App Store, which immediately attracted a lot of criticism and complaints, mainly targeting gambling ads and content that does not meet age ratings.

The ad was removed the next day, and an Apple spokesperson acknowledged the situation. But due to concerns about Apple advertising, there are already concerns that dynamic islands on the iPhone 14 Pro will also be advertised.

The picture shows a netizen PS, intended to satirize Apple, picture / @simonbs

In the long run, Apple’s next growth miracle will be found in wearables. Cook has publicly expressed interest in AR since at least 2016, and has gradually become “AR’s number one fan”, viewing AR as an idea as “big” as a smartphone.

It is the next generation computing platform.

Looking back at the history of personal computing platforms today, we will find that from PCs to smartphones, Apple has not missed a generation of computing platforms—from the Apple I in 1976 to the original iPhone in 2007, and naturally it is impossible to let go of AR. When Jobs explained Apple’s transition from a computer company to a mobile phone company in 2010, he said:

The important thing is that we have to initiate the transformation, just like Christensen’s “innovator’s dilemma” – the person who invents something is often the last person to see the end. We obviously don’t want to be left behind.

In fact, Apple has already opened the layout, the spatial audio of AirPods, the health monitoring of Apple Watch and the “useless” LiDAR camera on iPad Pro, in addition to the core chip.

Drawing based on the description of Apple’s VR product prototype, photo / @ianzelbo

Sources including Ming-Chi Kuo, The Information, and Bloomberg all said that Apple does not expect to launch the AR device Cook has been thinking about until 2025. Before that, Apple will release a VR product later this year or next year, which is expected to support MR applications, and will be equipped with an M2 chip and 16GB of memory, in addition to a secondary chip that may be responsible for processing device sensor data.

This business may be Apple’s next growth miracle.