Apple reports its third consecutive quarter of revenue decline – here’s how experts see it

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on Aug 3, 2023
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  • Apple says its revenue from iPhone, Mac, and iPad was down YoY in Q3.
  • Three experts share their respective view on its quarterly release.
  • Apple stock is down more than 2.0% in after-hours trading on Thursday.

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Apple Inc (NASDAQ: AAPL) just reported its financial results for the third quarter that topped Street estimates. Shares up still trading down in extended hours.  

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Services revenue stood out this quarter

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The tech behemoth attributed strength in its recently concluded quarter primarily to services revenue that went up a better-than-expected 8.0% to $21.21 billion. CEO Tim Cook told CNBC following the release:

Advertising has definitely accelerated from before, and the App Store has definitely accelerated from before.

He dubbed the recently unveiled Vision Pro mixed reality headset a scion of Apple’s years-long focus on artificial intelligence and confirmed that the multinational will continue to invest in AI moving forward.

Apple Inc was recently reported working on a ChatGPT rival (read more).

iPhone revenue missed Street estimates

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On the downside, though, iPhone, which typically tends to be its strongest segment, came in down 2.0% on a year-over-year basis.  

The handset generated $39.67 billion in revenue in Q3 versus $39.91 billion expected. Still, Angelo Zino of CFRA Research said today on CNBC’s “Closing Bell: Overtime”:

June quarter is typically the trough of the iPhone cycle. So, it tends to matter a lot less. We do expect them to at least imply their guidance towards a return to growth in September quarter.

His “buy” rating on the Apple stock comes with a price target of $220 that suggests about a 20% upside from here.

iPad revenue tanked 20%

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Apple noted a 7.0% hit to its Mac revenue as well in the third quarter that printed at $6.84 billion. But that still topped $6.62 billion that analysts had called for.

Things were worse in the iPad segment, though. The tablet PCs brought in $5.79 billion – down 20% from a year ago and well below the $6.41 billion consensus. According to Scott Kessler – the Global Sector Lead at Third Bridge:

I think people have recognised that there are some continuing hardware headwinds. But they are really focused on the next iPhone – the announcement coming perhaps next month.

A positive in the earnings print was China sales that saw a “definite acceleration” and printed at $15.76 billion – up 8.0% versus the same quarter last year. At writing, Apple stock is up 50% year-to-date.

Other notable figures in Apple’s Q3 earnings

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Earned $19.88 billion versus the year-ago $19.44 billion

EPS declined from $1.20 to $1.26 as per the press release

Revenue ticked down 1.0% year-on-year to $81.80 billion

Consensus was $1.19 a share on $81.69 billion in revenue

Other products revenue went up a less-than-expected 2.0%

Apple improved gross margin in the third quarter by 30 basis points to 44.5%. Sharing his view on the iPhone maker, Wedbush Securities analyst Dan Ives said on CNBC’s “Closing Bell”:

As we go into next year, if services uptick and we believe you’ll get back to double digits growth on services, we could be looking potentially $1.5 trillion in services valuation, what I believe could ultimately be $100 billion annual revenue. And then, 25% of 1.2 billion have not upgraded their iPhone in four plus years. The pent-up demand continues to be the story.

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