The consumer tech giant from Cupertino, California continues to rely on the iPhone, its flagship product, but until when?
Apple (AAPL) – Get Apple Inc. Report held its rank.
The world’s most valuable company just gave investors, worried about the coming recession, what they wanted to hear: the economy is slowing, but not catastrophically.
The giant of Cupertino in California has indeed announced quarterly results above analysts’ expectations. Apple earned more than $19.44 billion for the three months ending in June, the group’s fiscal third quarter, as revenues rose 2% from last year to $82.96 billion, just ahead of analysts’ estimates of $82.88 billion.
This financial performance has confirmed that the iPhone remains the cash cow of the group. Apple said iPhone revenues rose 2.8% from last year to $40.67 billion, just ahead of the $40.5 billion Street forecast. Two new phones are expected to be announced in September.
But while we are in the third quarter of the year, traditionally the one where Apple has very few new products to launch, there is a vagueness surrounding two other flagship products: the Mac and the iPad.
“We didn’t have enough product to test the demand,” CEO Tim Cook told Bloomberg.
Apple launched a new MacBook Pro and new MacBook Air, its best-selling computer, in June. The company started shipping them in July. The long-awaited launch may have caused some consumers to delay their purchases, a decision that would have impacted June sales.
As for the iPad, the firm had presented a new iPad Air tablet in March coming with the house M1 chip. Other tablets with more powerful chips are planned by the end of the year.
Mac sales were down 10.4% year-over-year at $7.38 billion and below analysts’ expectations of $8.45 billion.
The resurrection of the iPad observed at the time of the covid-19 pandemic seems to be fading. The iPad’s revenue fell 2% to $7.22 billion but came in above analysts’ expectations ($6.93 billion), which were very low as there is consensus that Apple may give tablets less priority if the chip shortage continues.
The Demand Is Soft
But Cook says the decline in revenue from both products is due to the strong dollar and supply constraints. The lockdown put in place in some regions and cities in China at the beginning of the year affected Apple partners like Foxconn, which delayed the launch of the MacBook Air and MacBook Pro for example.
Indeed, the Californian group’s partners have been forced either to temporarily close their Chinese factories or to operate at limited production capacity.
Cook had warned in April that Covid and supply chain disruptions around what he called the “Shanghai corridor”, as well as Russia’s war in Ukraine, would clip between $4 billion and $8 billion from second-quarter revenues.
The dollar has risen more than 13% so far this year and reached a two-decade peak against its global peers earlier this month.
Besides these explanations, the Mac and the iPad also suffer from a demand problem on the part of consumers, who have begun to limit their spending in preparation for difficult times.
Semiconductor makers and computer vendors have warned that demand for PCs and smartphones is slowing across the world. The Mac and the iPad do not seem to be spared by this trend.
“We are seeing strength across industrial and enterprise, which is offset by pockets of weakness in consumer products,” Akash Palkhiwala, Chief Financial Officer of chip maker Qualcomm (QCOM) – Get QUALCOMM Incorporated Report, told analysts on July 27.