Even though Apple fared reasonably well, the July-September
results released on Thursday signalled that the world's most valuable company
is facing some of the same economic headwinds that hammered the profits of
Microsoft and the corporate parents of both Google and Facebook.
The company's fiscal fourth quarter revenue rose 8 percent
from the same time last year to $90.1 billion. That was an improvement from the
scant 2 percent uptick in revenue during its April-June quarter when supply
problems caused by pandemic-related factory shutdowns dinged its sales.
The Cupertino, California, company's profit for the most
recent quarter totalled $20.72 billion, or $1.29 per share, up by less than 1
percent from the same time last year.
Both the revenue and earnings per share were slightly above
analyst estimates. But on the downside, sales of Apple's most popular product,
the iPhone, and another big money maker, and the services division, were both
lower than analysts had been anticipating — a sign consumers may be cutting
back amid the highest inflation in 40 years.
Apple is facing “increasingly difficult economic
conditions," CEO Tim Cook acknowledged during a Thursday conference call
with analysts. “A lot of people in a lot of places are struggling."
Those challenges are one of the reasons Apple expects its
revenue growth to decelerate during the current October-December period, even
though this year's quarter will include one more week than last year's, Apple's
Chief Financial Officer Luca Maestri warned during conference call. The strong
US dollar, which has lowered Apple's reported sales internationally, is also
contributing to the anticipated slowdown.
Investors initially reacted negatively after Maestri's made
that forecast, driving down Apple's shares by about 3 percent in extended
trading, but seemed to be feeling more optimistic about the company's prospects
by the time management concluded the conference call. Apple's shares were up by
more than 1 percent late Thursday. Mirroring other once high-flying stocks in
tech, Apple's stock still has dropped almost 20 percent so far in 2022.
The iPhone — still Apple's marquee product 15 years after
its debut – accounted for most of its success during the past quarter, even
though the company didn't sell quite as many of the devices as analysts had
hoped. Boosted by the release of four new models in late September, iPhones
sales climbed 10 percent from the same time last year to $42.63 billion.
But industry analysts are starting to fret over how much
longer consumers will splurge on new phones as they feel the pinch of the past
year's stubbornly high inflation rates. If those financial pressures persist,
it could cause more households to curtail their spending during the holiday
shopping season, especially on the kind of pricey gadgets that are Apple's
cornerstone.
That's one of the primary reasons the research firm International
Data is now expecting worldwide smartphone shipments this year to fall 6.5
percent from 2021, a downward revision of three full percentage points —
translating into about 150 million fewer devices being sold — from an earlier
forecast made in May.
Apple won't suffer as much as the makers of phones running
on Google's Android operating system, IDC predicted, but it still will result
in a significant slowdown. IDC projects iPhone shipments will edge up by less
0.5 percent, with the average selling price of the device hovering around $950.
Through the first nine months of this year, iPhone sales are up 6 percent from
last year.
“We knew Apple's iPhone business was slowing down, but we're
also starting to see that trickle into their services segment which will be one
cause for concern," said Investing.com analyst Jesse Cohen.
Maestri told analysts that weaker sales of advertising and
gaming were the biggest drag on the services division during the most recent
quarter. © Reuters
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