The report itself was fine, more or less. The company’s revenues increased, barely but increased, by 1.9% to 82.96 billion dollars compared to the same quarter last year and a record revenue for Apple in the June quarter. Net profit, on the other hand, decreased by 10.6% to 19.44 billion dollar. In both indices, the company exceeded market forecasts.
Considering the pessimistic atmosphere in the markets, and the disappointing results provided by companies like Meta, this is a positive point that the situation may not be alarming, but not as bad as one might expect.
The growth was led by increases in iPhone sales (2.8% to $40.67 billion) and Apple’s services category (12.1% to $19.6 billion). Apple’s chief financial officer, Luca Mastri, told Reuters that although macroeconomic indicators in the world are in a negative trend, when it comes to demand for the iPhone, Apple does not see a slowdown. It is difficult to extrapolate from these data on the state of the market, and even on the state of the smartphone market: Apple has a loyal customer base and relatively affluent, which reacts more robustly to economic events such as a recession. Indeed, according to data from the research company Canalys, the smartphone market as a whole shrank in the second quarter by 9%, even while Apple’s revenues from the iPhone increased.
Other categories of the company did not register such an impressive performance. Mac sales fell by 10.4% to $7.382 billion and iPad sales by 2% to $7.22 billion. The 7.9% decrease in the category of wearable products and peripheral accessories, whose revenues totaled $8 billion, as well as a decrease in advertising revenues not directly represented in the report, was described by Mastri as “pockets of weakness” created by the effect of the economic weakening. “Fortunately, we have a broad portfolio , so we know we can navigate it,” he told Reuters.
The encouraging news from Maestri concerns the supply chain difficulties that Apple and the market as a whole are suffering from. Difficulties in supplying spare parts particularly hurt Mac and iPad sales, but their effect began to weaken in the current quarter. According to him, although they caused Apple a loss of revenue of 4 billion dollars, the number is lower than the company’s forecasts.
And there is even optimistic news: the supply difficulties are expected to decrease in the current quarter, and Apple estimates that the increase in revenues will be higher than in the June quarter. This is an encouraging forecast, first of all for Apple but also for the entire market. The current difficult conditions are largely the result of the ongoing difficulties in the supply chain, which have delayed the shipment of products, and raised the prices of raw materials and spare parts. The current inflation is largely a result of these difficulties.
If Apple is already seeing the relief in its supply chain, the rest of the market may not be far behind. Such a trend will release pressure on manufacturers, reduce their shipping and production costs, allow products to be delivered faster and reduce supply pressure. This can lead to a slowdown in price increases and lower pessimism in the markets.
But that’s still in the future, maybe not very far. For now, Apple is still cautious. The company is preparing, among other things, for the possibility of a drop in demand that will leave it stuck with an inventory of devices that no one wants. “You can’t really test demand unless you have supply,” CEO Tim Cook said in a conversation with analysts after the report was published. “We were so far from that in the last quarter that we have an estimate of what the demand was. But it’s only an estimate.” At the same time, and similar to other technology giants, Apple is slowing recruitment and cutting costs. “We are more strict in hiring employees, given the reality in the environment,” Cook said in this regard.
Apple may be optimistic about the future, but it’s setting itself up for a reality where its predictions won’t come true. And this is perhaps good advice for everyone: hope for the best, but prepare for the worst. Because right now, no one really knows what will happen in the next six months.