On November 4 – Counterpoint Research today released a research report saying that Apple’s revenue exceeded expectations despite unfavorable foreign exchange and supply constraints.
Analyst HANISH BHATIA said Apple’s revenue grew 8.1 percent year-over-year to a record $90.1 billion in the September quarter of the fiscal year 2022, far exceeding Wall Street expectations and demonstrating Apple’s resilience in dealing with a difficult macro environment and unfavorable foreign exchange trends. Apple achieved strong revenue growth across all product lines, except for the iPad. Currency fluctuations continued to plague Apple, even into the peak holiday season. At the same time, supply shortages related to silicon materials did not have a significant adverse impact on Apple in the third quarter.
iPhone 14 shipments remain constrained by supply shortages, at least for the time being
- Despite currency headwinds, Apple’s iPhone revenue grew 9.7 percent year-over-year on the back of a strong performance last year.
- Apple’s user base is at an all-time high, driven by a record number of users upgrading to new phones and double-digit growth in the number of new users switching to iPhone, which IT Home has learned indicates a continued shift from Android to iOS.
- Another significant milestone to note is that growth is at record levels even in the face of currency devaluation in emerging markets (i.e., India, Indonesia, Thailand, Vietnam, and Mexico), indicating significant room for growth in these regions.
- According to preliminary channel research, a significantly higher share of Pro models and higher memory versions of the iPhone 14 series shipped, which further increased the average iPhone sales price.
- In the first few weeks after iPhone 14 was released, sales were limited by supply constraints. Only after the first round of demand stabilizes can we predict the optimal mix of “Pro” and “non-pro” models and the impact of sluggish macroeconomic factors on them.
Unprecedented growth in Mac sales, driven by replenishment of the channel, completion of open orders, and new product launches
- Despite unfavorable currency conditions, revenue from Macs grew 25.4 percent year-over-year to an all-time high of $11.5 billion.
- Apple also benefited from the release of the new M2 chip-powered MacBook Air and MacBook Pro, which improved Mac end-use availability and allowed Apple to fulfill open orders from the previous quarter and replenish the channel in time for the peak holiday season.
- Last quarter, the Mac and iPad product lines were affected by supply shortages, but Apple appears to have resolved the issue in time for this holiday season.
- The Mac end-user base also reached an all-time high, attracting upgrades and users to their first Mac.
- More than half of all Mac purchases are by new users. This is critical for Apple as it continues to attract a creator base and will reach a broader audience.
iPad revenue decline was driven primarily by release timing
- Revenue from iPad declined 13.1 percent year-over-year to $7.2 billion, driven primarily by the timing of product launches.
- The iPad user base also reached an all-time high, with more than half of all iPad purchases being by new users.
- The iPad Pro (6th generation) was released in October and features Apple’s latest M2 silicon chip, ProRes capabilities, new SmartHDR and faster network connectivity (Wi-Fi 6E support for the first time in an iPad model) for heavy users seeking top-of-the-line features.
Apple Watch availability remains limited
- Wearable device products also grew strongly, driven by demand for the new Apple Watch SE, Watch 8 and Watch Ultra, but the supply of these products remained constrained during the quarter.
- The category grew despite currency headwinds and the loss of business in Russia. Notably, two-thirds of Apple Watch purchases were made by new customers.
- New AirPods continued to contribute to revenue in this segment but were also impacted by currency issues.
Services segment growth expected, but risks loom
- As the user base for iPhone and other iOS devices reaches an all-time high, the services business will trend upward and a super cycle could be in the offing. However, the segment is still more exposed to risks than other segments.
- Services revenue grew 5 percent year-over-year to $19.2 billion in the quarter, despite significant currency headwinds. This was driven by 900 million paid subscriptions. Related paid subscriptions increased by 155 million in the last 12 months.
- Apple’s paid services such as iCloud had record quarterly revenue, but digital advertising and gaming services underperformed due to a difficult macro environment. This situation is likely to continue through December of this quarter.
- Apple increased the price of Apple Music subscriptions due to the increased cost of licensing content. For Apple TV+, Apple raised prices as it continued to expand its content library.
The enterprise segment continues to win new business
- The B2B segment, which targets large enterprises, grew strongly.
- Apple said Ford Motor Company is using iPad and iPhone’s advanced camera system for quality control of Ford’s next-generation F-150 electric pickup truck.
- Apple’s products also help companies like Cisco attract new talent and retain employees.
- The high retention rate of Apple products continues to be a key selling point for Apple in attracting new customers. Apple’s trade-in program has further shortened the product replacement cycle.
Overall, Apple’s strong grasp of its user base continues to drive business growth, while its “closed-loop ecosystem” strategy continues to enhance user stickiness and introduce new users to the entire ecosystem. As Apple’s user base continues to reach new heights, the current macro headwinds are only a temporary obstacle to long-term growth in the face of the super cycle.
