Compared with other Silicon Valley technology giants, Apple’s fourth fiscal quarter revenue and net profit both hit record highs for the same period in history, both exceeding analysts’ expectations and ushering in the best quarter in the company’s history. However, due to the impact of the epidemic and geopolitical conflicts, Apple does not have full confidence to continue this best fiscal quarter.
Author | Yu Huiru Editor | Luo Lijuan
Compared to other Silicon Valley tech giants, Apple has handed over a “not bad” transcript.
After the U.S. stock market closed on the 27th Eastern Time, Apple announced the fourth quarter financial report for fiscal year 2022: operating income was $90.146 billion, an increase of 8.14% year-on-year; net profit was $20.721 billion, an increase of 0.83% year-on-year; gross profit was $38.095 billion, A year-on-year increase of 8.3%.
“This was the best quarter in the company’s history,” Apple CEO Tim Cook said on the earnings call.
Indeed, in Apple’s report card, the company’s revenue and net profit both hit record highs for the same period in history, both higher than analysts’ expectations, and significantly stronger than the performance of the previous quarter.
By region revenue, revenue rose in all major regions except Japan. Among them, the Americas revenue was 39.808 billion US dollars, an increase of 8.12% year-on-year; the European revenue was 22.795 billion US dollars, a year-on-year increase of 9.62%; the Greater China revenue was 15.47 billion US dollars, a year-on-year increase of 6.23%; other Asia Pacific revenue was 6.373 billion US dollars , a year-on-year increase of 22.75%; while Japan’s revenue was US$5.7 billion, a year-on-year decrease of 4.86%.
In the hardware business, the most bright spots are Mac computers and wearable devices and accessories, whose revenue far exceeded expectations; iPhone revenue performance was slightly lower than expected, with an increase of nearly 10%; iPad tablet revenue fell more than expected, accelerating from the previous quarter slip.
In one clear sign, Apple’s services business recorded its slowest quarterly revenue growth in history during the quarter, and revenue growth fell well short of expectations. Apple CFO Luca Mastri blamed the foreign exchange impact. “The deceleration in services revenue stems from foreign exchange impacts, as well as a slowdown in digital advertising and gaming.”
“The impact of the exchange rate is temporary, and our message is that the fundamentals are good,” Mastry said.
This quarter’s financial report was released, and Apple still did not give a performance forecast for the next quarter. This has been Apple’s usual operation since the outbreak of the epidemic in 2020.
Although Apple’s performance is relatively stable compared with other major manufacturers in Silicon Valley, the core iPhone revenue is lower than expected. The new standard version of the iPhone and the new iPad tablet lack purchasing points due to innovation, and another growth driver service business is also sluggish.
Whether the “best quarter in the company’s history” is sustainable remains a question mark.
1
A mixed blessing for the hardware business
In the fourth quarter of fiscal 2022, hardware products contributed nearly 80% of Apple’s revenue. Among them, the iPhone is still Apple’s largest source of sales. During the reporting period, Apple’s total revenue was $90.146 billion, and iPhone revenue was $42.626 billion, accounting for nearly half.
However, the iPhone’s growth rate in the quarter was still slightly underwhelming compared with analysts’ expectations for a 10% growth rate.
In the past two years, the iPhone 12 series and the iPhone 13 series have both sold well, bringing huge sales growth to Apple. But the iPhone 14 series released a month ago has caused Apple to suffer the most doubts.
As early as the eve of the official release of the series of mobile phones, Tianfeng Securities analyst Ming-Chi Kuo revealed that the pre-order results for the iPhone 14 and iPhone 14 Plus were “bad”. After the iPhone 14 series was released, its basic version was even questioned by the outside world as “not innovative enough” and “not sincere enough”.
While there are no specific sales figures, figures from the industry don’t lie. According to Guo Tianxiang, a senior analyst at IDC China, the market response of the iPhone 14 series in the first week of its first sale was significantly worse than last year’s iPhone 13 series. According to media reports from Apple’s supply chain, the overall sales of the iPhone 14 series were more than 30% lower than expected.
Some analysts found that the depreciation rate of the iPhone 14 this year reached a new high record by investigating the quotations of recyclers.
However, the performance of Apple’s new phone series in the market is mixed: the basic version is unknown, but the Pro version is very popular, which has also boosted the sales of the mobile phone business.
According to Ming-Chi Kuo’s research, Apple will shift the iPhone 14 and Plus production lines to the iPhone 14 Pro and Pro Max, and the shipments of the latter two models will increase by 10%. After the transition, shipments of the iPhone 14 Pro series will account for 60% to 65% of all iPhone 14 series shipments.
However, in Cook’s view, it is “too early” to evaluate the sales of the iPhone 14. “At present, iPhones have performed well in China, the United States, the United Kingdom, Germany, Japan and other markets, and consumers’ overall satisfaction with iPhones has reached 98%.”
“The iPhone 14 Pro and Pro Max have been limited by supply chain from the beginning, which has had an impact on Apple’s sales. Apple is struggling to meet demand, and customer demand is strong and ultimately better than Apple expected, although supply chain tensions will continue for some time. ” Cook said on the earnings call.
Compared with other hardware products, sales of Mac computers were higher than analysts’ expectations, with sales soaring 25.39% year-on-year, generating $11.508 billion in revenue, exceeding expectations of $9.25 billion.
The Mac rebounded in the quarter amid a double-digit decline in the PC market, driven by strong sales of the redesigned MacBook Air and the new low-end 13-inch MacBook Pro, also seen as Apple’s most powerful products. Two popular computers. In addition, the restocking of previous orders in the channel also contributed to the significant growth of Mac in the quarter.
However, even Apple itself has doubts about the sustainability of the Mac’s bucking trend. During the conference call, Mastry admitted that Mac results “will not be repeated” in the coming quarters.
Revenue from the wearables and accessories business was $9.7 billion, up 9.8% year-over-year, beating consensus estimates. Cook said that the return of this business to positive growth is mainly due to the pull of new products such as Apple Watch and Airpods at the autumn launch.
The Pad product line has always been one of Apple’s important product lines. According to data from IDC, a third-party market organization, tablet shipments in 2021 will reach 168.8 million units, of which Apple ranks first with a market share of 34.2%.
However, in the fiscal quarter, the iPad tablet business revenue was 7.2 billion US dollars, a year-on-year decline of 13.1%, becoming the only category of all Apple products with negative net sales growth.
In addition to the decline in the overall tablet market demand, Apple’s product line has also been challenged by Android manufacturers. Currently, “Huami Ov”, Honor and other mobile phones have launched tablet products.
Apple has also begun to respond with the same strategy as the mobile phone business, which is to increase prices on high-end product lines to protect profits.
Not long ago, the iPad went on sale, updating three iPad products. Includes the entry-level iPad 10 and two iPad Pros. The starting price of new products has been raised. The starting price of the new iPad Pro 11-inch version is 6,799 yuan, which is 600 yuan more expensive than the previous generation, and the 12.9-inch version is even more expensive by 800 yuan; the starting price of the iPad 10 reaches 3,599 yuan, compared with The previous generation was 1000 yuan more expensive.
2
Service business is still difficult to take the lead
In order to reduce the dependence on hardware. Over the past few years, the services business has been seen as Apple’s next growth point after hardware.
However, this “future growth point” business did not perform well in the fiscal quarter: this fiscal quarter, Apple’s software services revenue was 19.19 billion US dollars, an increase of 4.98% year-on-year. Created the lowest quarterly revenue growth in history.
Mastry explained that the deceleration in services revenue stemmed from foreign exchange effects. “The service business grew by double digits at constant exchange rates, so the company is happy.”
“The impact of the exchange rate is temporary. The message we want to convey is that the fundamentals are good.” According to Maestri, Apple is satisfied with its performance in terms of user behavior and user stickiness. “It’s getting more and more trading accounts and paying accounts, now over 900 million paying users, an increase of 155 million over the past 12 months, and the engine of service growth is there.”
It is worth mentioning that, due to the difficulty of finding innovative breakthroughs in smartphones, the sales growth rate of the entire market has begun to slow down, and Apple has long sought other sources of income.
In recent months, Apple has made new moves in the advertising business. Want a piece of the advertising market dominated by Google, Meta, and Amazon.
In June, Apple expanded payments to allow customers to buy ad space on the App Store homepage.
In August, Apple job postings revealed that the company was planning to build a self-service platform for businesses to book ads and distribute them to customers through Apple products.
Recently, it was reported that Apple is soliciting potential buyers for the advertising space on Apple TV+. It’s unclear what form these ads will take, though.
Apple explained to advertisers the unique advantages of the new ad space resources on its official advertising page. “With Today’s Tab Ads, your app can be prominently featured on the App Store’s homepage—making it the first thing users see when they visit the App Store.”
In fact, Apple has been selling search ads in the App Store since 2016. Developers can purchase keywords through Apple Search Ads, and when users search for the keyword, the corresponding promotion information will appear on the search results page.
Apple is also aggressively hiring for talent in advertising. As of September, Apple’s advertising platform had only about 250 employees, according to a Financial Times analysis of LinkedIn data, and job listings show Apple plans to nearly double that number. .
Meanwhile, Apple is raising the prices of subscription services for Apple TV+, Apple One and Apple Music globally.
Beginning on October 24, the individual subscription price of Apple Music in the United States will increase from $9.99 to $10.99 per month, and the family subscription plan will increase from $14.99 to $16.99. The annual subscription service fee plan for individual accounts in the United States has risen from $99 to $109.
The price of a personal subscription to Apple Music in the UK has also risen to £10.99 per month, and the price of a paid family subscription plan has risen to £16.99.
Cook also responded to the move on the conference call: “Music licensing costs increase, and Apple is paying more for music, so prices have to go up.”
But Cook said singers will also make more money from their songs.
No one denies that these are all ways for Apple to increase revenue.
According to estimates by market research firm Insider Intelligence, Apple’s advertising business brings in $4 billion a year. That figure will increase to $30 billion by 2026, according to estimates from investment bank Evercore ISI.
3
Same cold
Compared with other giants, Apple is still strong, but this does not mean that it can sit back and relax. Especially in the smartphone business, the entire industry is shrinking, and Apple is naturally unable to avoid the cold.
After the earnings report, Apple also faced a key question: how to keep consumers in demand for the iPhone 14 lineup.
According to data released by Canalys, in the third quarter of 2022, the smartphone market in mainland China shipped 70 million units, but the market still hovered at a low level, down 11% year-on-year. Among them, Apple ranked fourth with 11.3 million units shipped.
Canalys analyst Liu Yixuan believes that strong demand for the iPhone 14 Pro series contributed to Apple’s shipment performance. However, the lackluster demand for the base version of the iPhone 14 shows that even Apple cannot completely escape the weakening consumer demand in the mainland Chinese market.
In Liu Yixuan’s view, against the backdrop of fierce competition and a downturn in the industry, Apple had to respond by taking aggressive promotions on its entry-level versions and previous-generation models, especially in the price range of 5,000-6,000 yuan.
With the release of the new iPhone 14 series, Apple lowered the price of the iPhone 13 series, and the prices of different versions of the iPhone 13 were 600 yuan, 500 yuan, and 300 yuan cheaper respectively. At the same time, Apple’s official website store also removed two models of iPhone 13 Pro and 13 Pro Max. The above move has also been interpreted by the outside world as Apple’s escort for new machine sales.
In its fourth-quarter report, Apple still did not issue guidance, but on the earnings call, Cook and Maestri made estimates for the next quarter.
“The annual growth rate of revenue in the next quarter will be lower than the 8.1% in the third quarter, and the annual growth rate of Mac sales will also be lower than this quarter. The service revenue is expected to continue to grow, but may be affected by the overall macro environment, growth may slow down. Slow down.” Mastry estimated.
This also shows that in the context of the impact of the epidemic and geopolitical conflicts, Apple does not have full confidence.
Concerns also come from the supply chain. During the earnings call, Cook mentioned that product lines including Apple Watch Ultra and iPhone 14 Pro are subject to “supply constraints.”
Due to the impact of the macro environment, the major tech giants in Silicon Valley felt an unprecedented chill, and began to adjust their talent recruitment and reserve policies, and even began to lay off employees on a large scale.
In May of this year, Netflix began laying off employees and reducing the size of the animation and sales departments; a few months later, Microsoft laid off the Xbox and other departments, and the total number of layoffs may exceed 1,000; chip giant Intel was revealed to be likely to announce layoffs in the near future, with the total number of layoffs Possibly as many as a thousand.
In its last quarterly report, Apple said it would be more cautious about spending, part of an overall slowdown in spending by Silicon Valley companies. After the announcement of the quarterly report, Cook revealed in an interview with the media that Apple has slowed down its hiring due to the impact of the macro environment.
