![]() ![]() Following Apple’s FY3Q23 results and earnings call, there has been no change in my thinking.Īlphabet reported a solid quarter as delays in some expenses and investments helped to boost CY2Q23 profitability. This past Monday, we went over three factors that point to FY2024 being a better one for Apple financially. The result is mostly flat revenue growth with FX continuing to serve as a growth headwind (Apple’s FX hedging program creates a lag in receiving any weaker dollar benefit). Meanwhile, solid Services revenue generation is being offset by weak Mac and iPad results. ![]() Emerging markets strength is being offset by a slowdown in iPhone upgrading in the U.S. The themes that guided the past few quarters for Apple were present in the company’s FY3Q23 results. Instead, we need to look at gross profit in absolute terms to obtain a cleaner assessment of Apple’s business. Gross margin percentages don’t tell the full story though. Management provided a 44.0% to 45.0% range. Based on management commentary, the company will come close to reporting a 11-year quarterly high for gross margin percentage 1Q24. Gross margin is cost of goods subtracted from revenue. ![]() There has been much attention placed on Apple’s gross margins (and rightly so). There are fewer people in a position to switch to iPhone.ģQ23 results: $36B gross profit (up 1.5% from 3Q22) has one of, if not the highest, iPhone sales share in the world. It also should be pointed out that the U.S. has been the outlier in terms of iPhone weakness is that economic anxiety (higher inflation and rates) combined with consumer behavior shifts (budget shift to services, leisure, eating out, and travel) have strained the appetite for consumer electronics. My response: The going theory for why the U.S. There are “some really good signs in most places in the world.” The smartphone market remains challenging in the U.S. Europe saw a record for the June quarter. Q (Morgan Stanley): How is the consumer behaving today versus 90 days ago? Are there geographical differences?Ĭook: Emerging markets was a strength. Reading Between the Lines of Apple’s 3Q23 Earnings Q&A With Analysts If you haven’t logged into Slack before, fill out this form to receive an invite.) (Members: Daily Updates are always accessible by logging into Slack. More information about the podcast add-on is found here. An audio version of this update is available to members who have the podcast add-on attached to their membership. App Store revenue was likely up a few percentage points year-over-year.Īn Above Avalon membership is required to continue reading this update. Net sales increased in 3Q23 due “primarily to higher net sales from advertising, cloud services, and the App Store.” Last quarter, the ordering was cloud services, music and advertising. My model has iPhone ASP up 4% while unit sales were down 6%. Net sales decreased in 3Q23 due “primarily to lower net sales from certain iPhone models, partially offset by higher net sales of iPhone 14 Pro models.” Based on that wording, higher iPhone ASP was registered in 3Q23 causing iPhone revenue growth to exceed unit sales growth. Apple provided additional commentary behind sales trends for its major product categories. The following items from Apple's 3Q23 10-Q jumped out at me. Published at the end of FY1Q, 2Q, and 3Q, 10-Q filings provide additional commentary and disclosures regarding a company's business and financial results. ![]()
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