Apple’s September quarter revenue for fiscal year 2022 increased 8.1% year-on-year to a record high of $ 90.1 billion, easily beating Wall Street estimates. The results showed the resilience of the company in the difficult macroeconomic environment and in the headwinds of foreign currency.
Shipments of the iPhone 14 are limited by supply, at least for now
• Apple’s iPhone revenue grew 9.7% year-on-year despite headwinds in foreign currency in addition to an already strong quarter a year ago.
• Apple had a record base installed number for active devices driven by a record number of upgrades and double-digit growth in switchers to iPhone, indicating continued migration from Android to iOS.
• Another noteworthy milestone was record growth in emerging markets, notably India, Indonesia, Thailand, Vietnam and Mexico, despite currency headwinds in their respective geographies, indicating strong room for growth in these regions.
• The higher mix of Pro models in the iPhone 14 line-up and higher memory variants is further increasing the ASP of the iPhone based on the initial channel controls.
• The first few weeks following the launch of the iPhone 14 were limited by limited supplies. We will only see the ideal sales mix of “Pro” and “non-Pro” models and the effects of macroeconomic headwinds only once initial demand has stabilized.
Record growth for Mac driven by channel filling, backorder fulfillment and new launches
• Mac sales revenue increased 25.4% year-on-year to an all-time high of $ 11.5 billion, despite headwinds on foreign exchange.
• The supply of Mac devices has improved and Apple was able to fulfill the previous quarter’s back orders and fill the channels before the holiday season. The launch of the new M2-powered MacBook Air and MacBook Pro has also helped the company.
• The Mac and iPad categories were hit by supply constraints in the previous quarter, but Apple appears to have addressed the issue ahead of the holiday season.
• The installed base for Mac devices also hit an all-time high, attracting both upgrading users and new Mac users.
• More than half of Mac purchases came from new users. This is critical to Apple as it continues to attract the creator community and expand its footprint to a wider audience.
IPad revenue has dropped, mainly due to launch times
• Revenue from iPad sales decreased 13.1% year-on-year to $ 7.2 billion, primarily due to the timing of the product launch.
• The installed base for iPad also hit a new all-time high, with more than half of all iPad purchases coming from new users.
• The 6th generation iPad Pro model launched in October with Apple’s latest internal M2 silicon chip, ProRes functionality, updated SmartHDR, and faster connectivity (enabled with Wi-Fi 6E for the first time in an iPad model ) for heavy users looking for higher specs.
Apple Watch remained limited by the offer
• The wearable category also saw strong growth, driven by demand for the new Apple Watch SE, Watch 8 and Watch Ultra, which remained limited by supply during the quarter.
• There has been growth in this category despite headwinds on foreign exchange and the loss of business in Russia. Specifically, two-thirds of Apple Watch purchases came from new users.
• The new AirPods continued to contribute to segment revenues, but were equally impacted by foreign exchange hurdles.
The services segment is poised for growth, but risks loom
• With the installed base of iPhones and other iOS devices at an all-time high, the services business is set for an upward trajectory and possibly a super cycle. However, the segment remains more exposed to risks than others.
• Despite being significantly impacted by currency headwinds, the segment’s quarterly revenue increased 5% yoy to $ 19.2 billion. It accounted for 900 million paid subscriptions, which has increased by 155 million over the past 12 months.
• Apple’s payment services and iCloud posted record quarterly revenues, while its digital advertising and gaming services slowed due to the challenging macroeconomic environment. This is likely to continue into the December quarter.
• Apple raised the price of Apple Music mainly due to the higher cost of content licensing. But in the case of Apple TV +, Apple has raised its prices as it continues to expand its content library.
The Enterprise segment continues to conquer new businesses
• Apple has seen strong growth in the B2B segment, which caters to large enterprises.
• Apple says Ford is using the iPad and iPhone’s advanced camera system for quality inspection of the new F-150 electric trucks.
• Apple products also help companies like Cisco attract new talent and retain employees.
• The high residual value of Apple devices remains a key strength for the company to attract new customers. Apple’s trade-in programs further allow the brand to shorten the refresh cycle.
• Overall, Apple’s strong hold on its user base continues to act as a growth engine, while its “walled garden” approach creates additional stickiness and attracts new users to its ecosystem. Current headwinds to the economy remain a temporary obstacle in the face of a long-term growth super cycle as the company’s installed base continues to set new records.