Apple‘s revenue grew nearly 9% on an annual basis in the quarter ending in March, the company said on Thursday, showing strong growth and bucking investor worries about a deteriorating macroeconomic environment affecting demand for high-end smartphones and computers.
Apple stock fell nearly 4% in extended trading after initially rising after Apple CFO Luca Maestri warned of several challenges in the current quarter, including supply constraints related to Covid that could hurt sales by between $4 billion and $8 billion. Apple also warned that demand in China was being hurt by Covid-related lockdowns.
Apple CEO Tim Cook said that the company was “not immune” to supply chain challenges.
Here’s how Apple did versus Refinitiv consensus estimates:
- EPS: $1.52 vs. $1.43 estimated
- Revenue: $97.28 billion vs. $93.89 billion estimated, up 8.59% year-over-year
- iPhone revenue: $50.57 billion vs. $47.88 billion estimated, up 5.5% year-over-year
- Services revenue: $19.82 billion vs. $19.72 billion estimated, up 17.28% year-over-tear
- Other Products revenue: $8.81 billion vs. $9.05 billion estimated, up 12.37% year-over-year
- Mac revenue: $10.44 billion vs. $9.25 billion estimated, up 14.73% year-over-year
- iPad revenue: $7.65 billion vs. $7.14 billion estimated, down 1.92% year-over-year
- Gross margin: 43.7% vs. 43.1% estimated
Apple did not provide a forecast for the current quarter. Apple hasn’t provided official revenue guidance since February 2020, citing uncertainty from the Covid-19 pandemic.
Apple said that its board of directors authorized $90 billion in share buybacks, maintaining its pace as the public company that spends the most buying its own shares. Apple spent $88.3 billion on buybacks in 2021, according to S&P Dow Jones Indices.
Apple increased its dividend by 5% to $0.23 per share.
Apple’s iPhone business grew over 5% during the quarter, adding more evidence that the current iPhone 13 model is selling well.
Cook said that the iPhone business had a successful quarter with “switchers,” or people who previously had an Android phone but decided to buy an iPhone.
“We had a record level of upgraders during the quarter and we grew switchers, strong double digits,” Cook told CNBC’s Steve Kovach.
The beat also suggests that Apple’s premium smartphone business may be insulated from concerns about deteriorating consumer confidence. The increase in sales also came despite a difficult year-over-year iPhone comparison, since the new iPhones were launched earlier in 2021.
“It’s clearly a strong cycle,” Cook said.
Mac computers continued to grow strongly after Apple transitioned its lineup to use its own M1 chips instead of Intel processors. Sales were up nearly 15% year-over-year to $10.44 billion.
However, Apple’s iPad business continues to go sideways, with sales down 2.1% from a year ago, despite updated models with Apple’s M1 chip. Cook said that the iPad business had “very significant supply constraints” during the quarter.
Apple’s profitable services business, which includes subscriptions, licensing fees, and extended warranties, continues to grow strongly with over 17% growth. However, Apple’s services business in the past two years had made a habit of beating Wall Street expectations by between 3% and over 8%, and this quarter, it only exceeded Refinitiv estimates by 0.51%.
“The [Services] comps are a bit strange during COVID, because we’ve had lockdowns and then reopenings and so on,” Apple CFO Luca Maestri said in an interview with CNBC, adding that during some periods in the last two years that “digital content went through the roof.”
Cook said that Apple’s financial performance was “better than we anticipated.” The fastest growing region for Apple was the Americas, which saw sales rise 20% during the quarter to $50.57 billion. Greater China, which includes Hong Kong and Taiwan, grew at a slower 3.47% rate to $18.34 billion. Cook said Covid-related China lockdowns didn’t impact Apple during the quarter.