Apple Tops Estimates, Declines to Offer Q1 Forecast

AAPL earnings beat analysts’ Q4 expectations; shares dip but recover after hours

KEY TAKEAWAYS

• Apple’s Q4 earnings of $1.29 per share topped analyst estimates, as did its 8.1% revenue growth.
• Shares fell 3% in after-hours trading but later recovered to rise 0.7% even as the company failed to provide a Q1 revenue forecast, citing the uncertain economic environment.
• Apple’s services revenue fell short of expectations, and will be slowed by weakness in digital advertising and gaming as well as currency effects in Q1, the company said.
• Apple said Q1 revenue gains will trail the 8.1% year-over-year growth posted in Q4.

Apple Earnings Results

Apple Financial Results: Analysis

Apple Inc. (AAPL) quarterly results topped market expectations after the closing bell on Oct. 27, 2022, separating the iPhone maker from other megacap tech stocks heavily discounted this week after earnings disappointments.

The stock dipped after Apple declined to offer a revenue outlook for the current quarter, citing “continued uncertainty” in the economy, but has since recovered to trade more than 1% higher. Apple shares were down 18% year-over-year ahead of the results.

Apple reported Q4 earnings of $1.29 per share, 2 cents above the average analyst estimate. Revenue rose 8.1% to $90.1 billion, also exceeding expectations. In contrast, Apple’s services revenue fell short of analysts’ consensus, even as these higher-margin sales increased 5% year-over-year.1

iPhone revenue of $42.6 billion was short of market expectations of $43.2 billion, CNBC reported. Apple CEO Tim Cook told CNBC the supply of the high-end iPhone 14Pro was constrained.2

Apple Earnings Call Recap

The most valuable company in the world is not immune to the effects of a global economic slowdown amid high inflation, rising interest rates, and a strong U.S. dollar, which diminishes the dollar value of Apple’s sales in foreign markets. The U.S. dollar’s gains reduced Q4 quarterly revenue growth by more than 6 percentage points, and will lop about 10 percentage points off growth in Q1 FY 2023, Apple Chief Financial Officer Luca Maestri said in the company’s Oct. 27 earnings call after market close.

In the prior earnings report three months ago, Maestri noted “the challenging operating environment.” In the latest statement, he cited “a challenging and volatile macroeconomic backdrop.”3

In addition to the drag from the strong dollar, Mac revenue is expected to drop substantially from last year, which featured the launch of new models, while services revenue is likely “to be impacted by the macroeconomic environment increasingly impacting foreign exchange, digital advertising, and gaming.” Maestri said in the call.