Apple expects faster sales growth, strong demand for iPhones despite the gloomy economy

July 28 (Reuters) – Apple Inc (AAPL.O) on Thursday said component shortages are easing and demand for iPhones is relentless despite consumers having cut other spending, helping it exceed Wall Street expectations and predict faster sales growth in the future.

Shares of the Silicon Valley giant rose 3.5% hours after the results were published.

Although macroeconomic indicators around the world are turning negative, Chief Financial Officer Luca Maestri told Reuters there has been no slowdown in demand for the iPhone, the company’s main source of revenue.

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Phone sales in the fiscal third quarter rose 3% to $ 40.7 billion as Wall Street braced for a 3% decline. In contrast, the global global smartphone market fell 9% during the quarter just ended, according to data from Canalys.

Apple’s loyal and relatively affluent customer base has enabled it to withstand declines in consumer spending better than other brands in the past, and the company’s latest quarterly results suggest a similar pattern is emerging.

Canalys Research analyst Runar Bjorhovde said: “Apple has a certain robustness in this respect that will allow it to have less impact than many of its competitors.”

Apple has offered some caution.

The collapse of the economy is hurting sales of advertising, accessories and home products, Apple’s Masters said in an interview, calling the units “pockets of weakness.”

“Fortunately, we have a very large portfolio, so we know we will be able to navigate,” he added.

The results show that Apple’s advertising business, which includes selling ads alongside news articles and search results on app stores, is vulnerable to marketing cuts just like rivals Snap Inc (SNAP.N) and Meta Platforms. Inc (META.O).

Component shortages will continue to hinder Mac and iPad sales, Maestri said, although the impact has been mitigated. They cost Apple less than $ 4 billion in sales in the quarter ended June 25, less than expected. Maestri said the company expects the hit to subside further in the current quarter.

But Apple risks joining rivals in amassing an unsaleable stash of tablets and PCs if more customers hold back their purchases due to rising inflation and interest rates.

“In terms of testing demand, you can’t really test demand unless you have the supply,” Tim Cook, Apple’s CEO, told analysts Thursday. “And we were so far from that last quarter that we have an estimate of what we believe the demand was. But it’s an estimate.”

Citing economic uncertainty, Apple said it does not provide specific revenue guidance. But he said sales from a year ago are expected to grow faster in the current quarter than the 2% growth seen in the quarter just ended.

‘MORE DELIBERATED’

Overall, Apple said quarterly sales and earnings were $ 83.0 billion and $ 1.20 per share, above estimates of $ 82.8 billion and $ 1.16 per share, according to Refinitiv data.

The rise of the US dollar has affected many companies such as Apple which generate substantial overseas revenue and get less cashback when they convert it. Apple said currency fluctuations reduced sales by 3% in the June quarter and would cut sales by 6% in the current quarter.

The shutdown of business in Russia earlier this year due to the war also hurt sales.

Apple, like many of its tech peers, is slowing hiring and cutting costs given the challenging economic climate. to learn more Cook said on Thursday that Apple “has been more deliberate in hiring in recognition of the realities of the environment.”

The most recent economic problems include supply chain disruptions that have affected the production of some Apple products such as iPads and Macs whose assembly locations were clustered near regions of China that have been blocked by COVID.

While iPhone and iPad sales exceeded expectations, revenues from services, Mac computers and accessories missed Wall Street targets, and sales in the crucial Chinese market fell by 1% as consumers stuck there limited sales. .

Apple is also facing slow overall economic growth in China, where its fiscal third quarter sales were $ 14.6 billion.

Growth in the company’s service sector, which has provided a boost to sales and profits in recent years, was 12%, below the previous year’s 33% rate, with revenue of 19.6 billions of dollars, below the estimate of $ 19.7 billion.

Apple said it now has 860 million paying subscribers to its services, up from 825 million in the previous quarter.

Sales of the iPad and Mac were $ 7.2 billion and $ 7.4 billion, compared to estimates of $ 6.9 billion and $ 8.7 billion. Mac sales represented a 10% contraction, following record sales since 2020, first thanks to an increase in work from home and then from Apple’s new proprietary processor chips.

Its shares closed Thursday down about 11% this year, slightly less than the broader S&P 500 (.SPX) index and also less than other consumer hardware manufacturers such as Sonos Inc (SONO.O) and Samsung Electronics Co (005930.KS), the only company that sells more smartphones than Apple. Read more

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Recommendations by Stephen Nellis, Nivedita Balu and Paresh Dave; Editing by Peter Henderson and Lisa Shumaker

Our Standards: Thomson Reuters Trust Principles.

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