Apple Q3 earnings review: Earnings exceed market expectations; bullish on iPhone performance in 2H22
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Against the backdrop of rising global macroeconomic uncertainty and continued supply chain tensions due to the epidemic, $Apple (AAPL.US)$'s earnings growth slowed this quarter due to the negative impact of supply-side and FX fluctuations. However, revenue and earnings performance still exceeded market expectations. CITIC Securities believes that the performance of iPhone phones in the high-end market is stabilizing; the supply chain of Mac & iPad is improving quarter by quarter; and the diversification of the software service business is also driving the company's growth. CITIC continues to be bullish on Apple's long-term investment value.
Key takeaways:
1. iPhone business: revenue hits record high in Q3 fiscal year, showing resilience of high-end model consumption; follow-up iPhone 14 release is worth attention.
Despite macro environmental factors and FX headwinds, the iPhone13 series remained in strong demand due to its advanced performance, features and accessibility. iPhone business FY3Q22 revenue grew to $40.67B (+2.8% YoY, -19.6% QoQ), a revenue record for the June Q3 quarter, demonstrating the consumer resilience of premium phones.
According to IDC, FY3Q22 smartphone shipments were 44.6 million units (+0.5% YoY, -24.4% QoQ), corresponding to a 15.6% market share, making the company the second largest smartphone manufacturer in the world. According to CITIC's calculations, the company's smartphone ASP was $912/unit (+5.3% YoY, +6.4% QoQ) in the quarter, with a clear trend towards high-end.
2. iPad business & Mac business: SupplycConstraints persist, M2 chips drive performance growth.
Revenue for the iPad business FY3Q22 was $7.22B (-2.0% YoY, -5.5% QoQ) due to continued supply constraints and FX headwinds. Despite supply disadvantages, demand for the iPad remained strong in consumer, education and enterprise markets around the world, especially with the new features brought by iPadOS16. The number of iPad users reached an all-time high in the quarter.
Apple announced the new MacBook Air and 13-inch MacBook Pro, both powered by the next-generation Mac chip, M2, which delivers a faster CPU, GPU, and higher memory bandwidth. Revenue of $7.38B (-10.4% YoY, -29.3% QoQ) was driven by the negative supply-side impact of the prevention policy in Shanghai on the Mac business during the quarter. Despite the continued slowdown in PC demand growth, the company expects the launch of new products with the M2 chip to see strong performance during the back-to-school season.
3. Software services business: solid customer base growth; lauch of Pay Later and a new generation of CarPlay
Software Services revenue for Q3 was $19.60B (+12.1% YoY, -1.1% QoQ), with a solid increase in revenue share to 23.6% (+2.2 pcts YoY, +3.3 pcts QoQ).
The company's customer base and engagement continued to grow, with double-digit growth in transaction accounts, paid accounts and paid subscriptions. More than 860 million users paid subscriptions (up 160 million over the past 12 months). In addition, new features in applications such as iCloud and Apple Music have further increased user satisfaction.
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