Apple's (AAPL) Q4 Earnings Beat Estimates, Revenues Fall Y/Y
Apple AAPL reported fourth-quarter fiscal 2023 earnings of $1.46 per share, which beat the Zacks Consensus Estimate by 5.04% and increased 13.2% year over year.
Net sales decreased 0.7% year over year to $89.498 billion, which beat the Zacks Consensus Estimate by 0.52%. Unfavorable forex hurt revenues by almost 200 basis points (bps).
iPhone sales increased 2.8% from the year-ago quarter to $43.805 billion and accounted for 48.9% of total sales. iPhone sales missed the Zacks Consensus Estimate by 0.97%.
Services revenues grew 16.3% from the year-ago quarter to $22.31 billion and accounted for 24.9% of sales. The figure also beat the consensus mark by 4.53%.
Apple now has more than 1 billion paid subscribers across its Services portfolio, nearly double what it had three years ago.
Both transacting accounts and paid accounts grew double-digits year over year in the reported quarter.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote
Top Line Details
America’s sales increased 0.8% year over year to $40.115 billion and accounted for 44.8% of total sales. The figure beat the Zacks Consensus Estimate by 5.45%.
Europe generated $22.463 billion in sales, down 1.5% on a year-over-year basis. The region accounted for 25.1% of total sales. Europe’s sales beat the consensus mark by 1.11%.
Greater China sales decreased 2.5% from the year-ago quarter to $15.084 billion, accounting for 16.9% of total sales. The figure lagged the Zacks Consensus Estimate by 13.03%.
Rest of the Asia Pacific generated sales of $6.331 billion, down 0.7% year over year. The region accounted for 7.1% of total sales. The figure beat the consensus mark by 4.8%.
Japan’s sales of $5.505 billion decreased 3.4% year over year, accounting for 6.2% of total sales. The figure lagged the consensus mark by 0.32%.
Top-Line Details
Product sales (75.1% of sales) decreased 5.3% year over year to $67.184 billion. Non-iPhone revenues (iPad, Mac and Wearables) decreased 17.5% on a combined basis.
iPad sales of $6.443 billion declined 10.2% year over year and accounted for 7.2% of total sales. The figure beat the Zacks Consensus Estimate by 10.04%.
Mac sales of $7.61 billion decreased 33.8% from the year-ago quarter and accounted for 8.5% of total sales. The figure lagged the Zacks Consensus Estimate by 8.1%.
Wearables, Home and Accessories sales decreased 3.4% year over year to $9.322 billion and accounted for 10.4% of total sales. The figure beat the consensus mark by 1.05%.
Apple Watch’s adoption rate continues to grow rapidly. More than two-thirds of the customers who purchased the Apple Watch during the reported quarter were first-time customers.
Operating Details
Gross margin of 45.2% expanded 290 bps on a year-over-year basis.
Moreover, the gross margin expanded 70 bps sequentially due to cost savings and a favorable mix shift toward services.
Products’ gross margin expanded 120 bps sequentially to 36.6%. Services’ gross margin was 70.9%, up 40 bps sequentially.
Operating expenses rose 1.9% year over year to $13.46 billion due to higher research & development expenses, which increased 8.1% year over year. Selling, general & administrative expenses decreased 4.5% year over year.
Operating margin expanded 250 bps on a year-over-year basis to 30.1%.
Balance Sheet
As of Sep 30, 2023, cash & marketable securities were $162.099 billion compared with $167.08 billion as of Jun 30, 2023.
Term debt, as of Sep 30, 2023, was $105.103 billion, down from $105.29 billion as of Jun 30, 2023.
Apple returned nearly $25 billion in the reported quarter through dividend payouts ($3.8 billion) and share repurchases ($15.5 billion).
Guidance
Apple expects the December quarter’s (first-quarter fiscal 2024) revenues to be similar to that of the year-ago quarter’s figure.
Apple expects iPhone’s year-over-year revenues to grow on an absolute basis. Revenues for Mac are expected to significantly accelerate compared with the September quarter’s reported figure.
It expects the year-over-year revenue growth for both iPad and Wearables, Home and Accessories to decelerate significantly from the September quarter due to a different timing of product launches.
For the Services segment, Apple expects average revenues per week to grow at a similar strong double-digit rate as it did during the September quarter.
Gross margin is expected between 45% and 46% in the first quarter of fiscal 2024. Operating expenses are expected between $14.4 billion and $14.6 billion.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
NetEase NTES, NVIDIA NVDA and Model N MODN are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetEase shares have gained 51.1% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.
NVIDIA shares have returned 197.5% year to date. NVDA is set to report its third-quarter fiscal 2024 results on Nov 21.
Model N shares have declined 39.2% year to date. MODN is set to report its fourth-quarter fiscal 2023 results on Nov 9.
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