Apple beats earnings estimates with iPhone momentum
Apple reported strong results for its quarterly earnings and issued sales forecasts that beat expectations, even though the company expects to continue to face chip supply constraints.
Apple executives said they expected sales to grow 14 percent to 17 percent in the third quarter of the current fiscal year, topping Wall Street forecasts, or 9.5 percent growth, to $102.93 billion, according to data from LSEG.
Previously, Apple reported better-than-expected second-quarter results; While customers were eager to purchase a new MacBook model under the guidance of incoming CEO John Ternus, supply constraints hindered iPhone sales.
Apple said its revenue rose nearly 17 percent to $111.18 billion in the second quarter of its fiscal year ending March 28.
Sales of the iPhone, still the company’s best-selling product almost 20 years after its launch, came in at US$56.99 billion, slightly below forecasts of US$57.21 billion, according to LSEG data, following the biggest refresh of the product line since 2017’s iPhone X.
Apple Chief Financial Officer Kevan Parekh also said the company will no longer aim to bring its net cash (cash minus debt) to a net neutral position. Apple embarked on this goal in 2018 but still had $54 billion in net cash at the end of its first fiscal quarter in January.
Apple CEO Tim Cook said that “iPhone sales lagged this quarter due to supply constraints for the advanced processor chips that form the brain of the device.” The chips for the iPhone 17 family are manufactured using a variant of the same Taiwan Semiconductor Manufacturing Co chip manufacturing technology as many leading AI chips.
“The demand has been unusual. There’s also a little less flexibility in the supply chain to get more parts at the moment,” Cook told Reuters.
The iPhone 17 family of devices and iPhone Air were spearheaded by CEO Ternus, who will take over from Cook in September.
Under Ternus, Pro models gained more features but also a higher price tag, while prices for entry-level models like the 17e and the base model iPhone 17 remained stable based on their storage capacity.
This strategy, along with its massive purchasing power, has helped Apple navigate higher memory chip prices so far. But memory costs will catch up with Apple starting this quarter and ending in June.
“We expect significantly higher memory costs,” Cook said on a conference call with analysts. “Where we do not color post-June, I would say we believe memory costs will have an increasing impact on our business after the June quarter.”
Investors are waiting to hear more about Apple’s plans for its voice assistant, Siri, which it plans to develop with Google technology.
Although Apple does not spend tens of billions of dollars each quarter on artificial intelligence like its competitors, its research and development costs increased by 33.5 percent to $11.42 billion in the second quarter of the fiscal year.
Apple’s services business, which includes revenue from its App Store, which is under regulatory scrutiny in Europe and elsewhere, generated revenue of $30.98 billion in the fiscal second quarter, above analysts’ estimates of $30.39 billion.
According to LSEG data, iPad sales came in at US$6.91 billion, compared to estimates of US$6.66 billion, and wearables, including the Apple Watch, generated revenue of US$7.9 billion, compared to expectations of US$7.7 billion.
According to Visible Alpha data, Apple’s major sales in China were $20.5 billion, beating analysts’ estimates of $19.45 billion.
with AP
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