Apple announced that it will release its fiscal 2022 third-quarter earnings report after the closing bell on Thursday, July 28.
A consensus of analysts estimates the company will earn $1.15 per share on $82.63B in revenue.
Previous Quarter Review
Apple posted fiscal second-quarter net income of $25 billion, or $1.52 a share, up from $23.6 billion, or $1.40 a share, in the year-earlier quarter. Apple's revenue rose to $97.3 billion from $89.6 billion.
Apple generated $50.6 billion in revenue from its iPhone business, up from $47.9 billion a year before.
The company saw $7.6 billion in iPad revenue, down from $7.8 billion a year prior, as well as $10.4 billion in Mac revenue, which was up from $9.1 billion.
Cook noted that Apple was "continuing to see such a strong demand for the iPad even while navigating the significant supply constraints we predicted at the start of the quarter."
Apple's June Quarter Could Top Estimates
Despite ongoing macro and supply-chain headwinds, there's a chance Apple could still report better-than-expected results for its fiscal third quarter ended in June with better-than-expected supply and manufacturing conditions. But things are likely to get tougher given the growing pressures on the consumer economy.
Analysts are looking for $1.15 per share in earnings on revenue of $82.63 billion from Apple for the fiscal third quarter. Those numbers don't look inspiring as compared to the prior-year period's earnings of $1.30 per share and revenue of $81.4 billion.
The company hadn't provided any guidance citing the near-term uncertainty surrounding its business. However, in reporting March quarter results, Apple had warned that supply constraints could reduce revenue in the quarter by $4 billion to $8 billion. But strong expectations for the iPhone 13 and upcoming iPhone 14 suggest that the impact may be somewhat mitigated.
In all, the company could spring a positive surprise when it releases its quarterly report later this month.
Apple Remains Competitive Even As Smartphone Market Stumbles
Global smartphone sales are declining this year. Counterpoint Research estimates that smartphone shipments were down 8% year over year in the first quarter of 2022 to 326 million units. The second quarter isn't looking good for smartphone sales, either, as shipments in May reportedly fell 10% year over year to 96 million units.
For the just-ended fiscal third quarter, some Wall Street analysts are bracing for a slight decline in iPhone 13 shipments. But analysts still expect the iPhone to fare better than rivals.
Apple might turn in better-than-expected results on the back of healthy iPhone demand. According to Morgan Stanley, the company reportedly built 44.3 million iPhones in the quarter that ended in June.
That doesn't seem surprising, as Apple has been outperforming the broader smartphone market. It increased its iPhone sales in the first quarter of the calendar year while the overall market declined, driven by the growing adoption of 5G smartphones.
Apple leads the 5G smartphone market and enjoys strong pricing power. So the iPhone could thrive despite the smartphone market's gloom. It is also worth noting that the company has a massive installed base of users who are in an upgrade window, which could set the company up for a strong second half. Foxconn, which is a key contractor that assembles iPhones, recently raised its guidance for the full year citing strong smartphone demand.
Apple's slightly higher expectations for the forthcoming iPhone 14 underscore a growing belief among Wall Street analysts that the company's sales are likely to hold up better than the broader smartphone industry if major economies enter a recession.
With Apple sitting at the higher end of the market, analysts believe that inflation in core items like food and fuel have taken a lesser toll on its relatively affluent user base.
Strong Dollar, Supply Chain Could Dent Apple’s Sales
Currency-rate headwinds are likely higher than Apple had forecast.
The huge rally in the U.S. dollar against European and Asian currencies continues to be a major factor in tech-sector earnings, analysts see substantial foreign-exchange risk for Apple.
In a research note, Goldman Sachs analyst Rod Hall said the effect of foreign exchange in the June quarter was likely worse than the company had expected.
Apple had projected revenue growth would take a 3 percentage-point hit from currency effects, but Hall believes that the actual impact will be at least a full point higher. Management projected an 8-point hit for the September quarter.
Meanwhile, Apple intends to slow its hiring and spending growth in some divisions next year to manage the current economic climate.
The decision comes as a result of the tech giant attempting to be more careful during periods of economic uncertainty. However, it is not a company-wide policy, and the decision won't impact all teams with Apple planning an "aggressive product launch schedule in 2023."
Apple has historically invested vast sums in research and development and hiring. However, soaring inflation and supply chain challenges are expected to impact the company's latest quarter.
Analyst Opinions
Bernstein analyst Toni Sacconaghi boosts his June-quarter revenue forecast to $84 billion from $82.8 billion, while nudging up his earnings-per-share forecast to $1.19, from $1.17. Sacconaghi's estimates are above the Street consensus forecast for revenue of $82.4 billion and profits of $1.15 a share.
Sacconaghi keeps his Market Perform rating and $170 target on Apple stock.
Bernstein raised its estimates for the fiscal third quarter, citing better-than-expected supply and strong demand in China.
Analyst Toni Sacconaghi raised his earnings per share estimates to $1.19 and revenue forecast to $84B, compared to the consensus of $1.15 and $82.5B, noting Apple likely grew Services 12% year-over-year, even when accounting for a tough comparison.
Analyst Dan Ives, who has an outperform rating on Apple shares, said that demand for the iPhone is "holding up slightly better than expected," but there is still going to be some weakness, though Wall Street is expecting that.
TF International Securities analyst Ming-Chi Kuo tweeted that some iPhone 14 suppliers are having issues, but it will have just a "limited impact" on mass production of the next iPhone, as "other suppliers can fill the supply gap."
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