Yesterday’s Apple Q2 2023 earnings report revealed that the company saw a year-on-year fall in revenue. But while this might sound like bad news, the detail paints a better picture.
Investors appear to think the same, as the stock price is up more than 4% as of the time of writing …
The run-up to yesterday’s earnings report
Apple’s previous quarter had been a very tough one. Revenue was down 5%, and profit took a double-digit fall of 13%.
That wasn’t unexpected: Apple battled significant supply constraints in Q1 2023, primarily affecting the iPhone 14 Pro and iPhone 14 Pro Max. The company was even forced to release a statement to investors back in November, warning that iPhone 14 Pro shipments would be lower than previously anticipated.
Chief financial officer Luca Maestri also cautioned investors that the company expected a similar decline in the following quarter, and analysts supported this pessimistic prediction, so investors were expecting revenue to be 5% down. The reality wasn’t so bad, at negative 3%.
Apple Q2 2023 earnings beat expectations
Let’s compare analyst expectations with yesterday’s numbers for revenue and earnings per share:
| Analyst consensus | Actual results | Difference | |
| Revenue | $92.96B | $94.8B | + £1.84B |
| EPS | $1.43 | $1.52 | + £0.09 |
While Apple hasn’t yet returned to year-on-year growth, it is clawing its way back in the right direction and at a better-than-expected pace.
Even here, though, it is the value of the dollar that has been Apple’s biggest enemy. Take exchange rate changes out of the picture, and revenue would have grown, explained CEO Tim Cook:
During the March quarter, we continued to face foreign exchange headwinds which had an impact of more than 500 basis points, as well as ongoing challenges related to the macroeconomic environment. Revenue was down 3% year over year as a result, while on a constant currency basis, we grew in total and in the vast majority of the markets we track.
There was also good news in the product breakdown …
Winners and losers
Jason Snell has done his usual amazing job at making it all visible at-a-glance. So let’s look at the year-on-year revenue change by product category.
Ok, 2% growth compared to the heady days of 50% plus might not sound like a lot. But achieving any growth in these conditions is impressive, and setting a new quarterly record even more so. It is this news in particular which is likely to have impressed analysts and investors.
The iPad picture was less pretty – that’s the worst quarter since 2020.
On the face of it, Mac revenue looks dreadful, with a year-on-year fall of almost a third. But that of course needs to be looked at in the context of demand for the first Apple Silicon Macs, which saw revenue shoot up by a massive 70%!
The first two quarters of last year also saw decent growth, so it’s not at all surprising to see fewer upgrades and Windows switchers by this stage.
Wearables were virtually flat, just 1% down, while Services just continues its seemingly unstoppable growth.
Again, less dramatic than the heady days of 2021 and early part of 2022, but that still amounts to an all-time record.
Looking ahead, Apple expects the current quarter to be similar to fiscal Q2, again due mostly to the uncertain economy and foreign currency rates. Maestri also said the June quarter would be a tough compare, due to the launch of the new iPhone SE and iPad Air.
So, we’re not going to see a return to growth in the short-term, but investors seem happy, and Apple expressed its own confidence in the company’s future by announcing – as expected – $90B in stock buybacks.
Check out the rest of the sixcolors charts here.
Photo by Wance Paleri/Unsplash
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