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Apple Reports Another Record Quarter

Driven by iPhone sales and Services revenue

Apple posted another record quarter last week. For the third quarter of fiscal year 2022, Apple had total revenue of $83.0 billion, a 2% increase over the same period last year. Revenue was comprised of $63.4 billion in product sales and $19.6 billion in services, including subscriptions. Product sales now make up 76.4% of total sales, while services revenue makes up the remaining 23.6%.

During the third quarter, Apple set revenue records in each services revenue category including all-time highs for Music, Cloud Services, Apple Care, and Payment Services. On the earnings call, Apple said they now have more than 860 million paid subscriptions across the services on their platform, an increase of 160 million during the last 12 months.

“This quarter’s record results speak to Apple’s constant efforts to innovate, to advance new possibilities, and to enrich the lives of our customers,” said Apple CEO Tim Cook in a July 28 news release. “As always, we are leading with our values, and expressing them in everything we build, from new features that are designed to protect user privacy and security, to tools that will enhance accessibility, part of our longstanding commitment to create products for everyone.”

On the earnings call, Cook spoke to Apple’s success despite all the challenges they are facing right now.

“We saw great enthusiasm for our products and services, resulting in an all-time record for our installed base of active devices. Our supply constraints were less than we anticipated at the beginning of the quarter, coming in slightly below the range we discussed during our last call. We know that this is a time of significant challenge around the world for all of us confronting new variants of COVID-19, to those experiencing a prolonged humanitarian crisis in Ukraine, and everyone dealing with the consequences of an uncertain economic environment,” Cook said.

Source: Apple

Quarterly highlights

Other financial highlights for the period ended June 25, 2022 include the following:

  • Apple reported net income of $19.4 billion, or $1.20 diluted earnings per share, compared to $21.7 billion, or $1.30 diluted earnings per share, for the third quarter of fiscal year 2021.
  • Net sales were strongest in the Americas at $37.5 billion, followed by Europe at $19.3 billion and China at $14.6 billion.
  • iPhone sales led product sales at $40.7 billion, followed by wearables, home and accessories at $8.1 billion, Mac at $7.4 billion and iPad at $7.2 billion.
  • Company gross margin was 43.3%, down 40 basis points from the previous quarter.
  • Products gross margin was 34.5%, down 190 basis points.
  • Services gross margin was 71.5%, down 110 basis points.
  • The company ended the quarter with $179 billion in cash and marketable securities, and the company returned $28 billion to shareholders during the quarter.
  • The company declared a cash dividend of $0.23 per share

Operational highlights

  • iOS16 is in public beta, along with iPadOS, MacOS Ventura and watchOS 9. The new versions include the ability to edit or delete sent messages, a new way to organize apps on iPad and Mac, and a customizable lock screen on the iPhone, among other new features.
  • Apple introduced a passkey, a next-generation credential they hope will replace passwords.
  • Apple TV+ received 52 Emmy Award nominations across 13 titles.
  • Apple TV+ is now offering MLB’s Friday Night Baseball.
  • Apple has a 10-year deal to present Major League soccer matches around the world.
  • The iOS app economy supports more than 2.2 million jobs.
  • In 2021, Apple prevented close to $1.5 billion fraudulent transactions by stopping more than 1.6 million risky and vulnerable apps and app updates.

Fourth quarter outlook

Luca Maestri, chief financial office, shared the company’s guidance for the fourth quarter.

  • Due to “continued uncertainty around the world,” Apple did not provide specific revenue guidance, but they did say they expect revenue growth to accelerate during the fourth quarter.
  • They expect fewer supply constraints than in the current quarter.
  • Services revenue will continue to grow but not at the same pace as seen in the current quarter.
  • Gross margin will range between 41.5% and 42.5%.

Insider Take

Though net income was down year-over-year, Apple’s financial results remain strong with the company continuing to hit revenue records. Services revenue, which has a high gross margin, continued to do well, as Apple expands subscription offerings. iPhone sales continue to be strong, despite inflation and an uncertain economy. It is likely Apple will finish their fiscal year 2022 on a high note.

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