Apple Q3: Too high to touch!

After the bell, Apple $Apple(AAPL)$ released its third-quarter results for fiscal 2023 (the second quarter of 2023), with revenue and net profit beating analysts' expectations:

Despite the bright results, Apple's shares fell as much as 3% in after-hours:

A detailed study of the reasons may be related to the lower-than-expected revenue of iPhone and iPad. Of course, the most important thing is that Apple has risen as high as 47% during the year when its fundamentals have not improved. As the saying goes, It is too high to touch! it is easy for investors to pick bones in the eggs if they are slightly lower than expected.

Specifically, Apple's revenue in the third quarter of fiscal 2023 was $81.8 billion, down 1.4% from a year earlier and slightly higher than analysts' expectations of $81.555 billion:

It is worth noting that this is Apple's third consecutive quarter of revenue decline, a record since 2016.

In terms of business, Apple's product revenue in the third quarter of fiscal 2023 was $60.58 billion, down 4.4% from a year earlier, while service revenue was $21.2 billion, up 8.2% year-over-year, exceeded analyst expectations of $20.8 billion:

By product, in the third quarter of fiscal year 2023, iPhone revenue was $39.67 billion, down 2.4% from the same period last year, less than analysts' expectations of $39.8 billion; Mac revenue was $6.84 billion, down 7.3% year-over-year, exceeded analysts' expectations of $6.4 billion; iPad revenue was $5.79 billion, down 19.8%, less than analysts' expectations of $6.3 billion; and wearable revenue was $8.28 billion, up 2.5% from the same period last year, slightly less than analysts' expectations of $8.4 billion:

By region, revenue in the Americas in the third quarter of fiscal year 2023 was $35.38 billion, down 5.6% from the same period last year, the third consecutive quarter of decline; revenue in Europe was $20.2 billion, up 4.8% year-over-year; and revenue in Greater China was $15.76 billion, up 7.9% from the same period last year. China was the fastest growing region, mainly affected by the pandemic in the same period last year. Revenue in Japan was $4.82 billion, down 11.5% year-over-year. Revenue in other regions was $5.6 billion, down 8.5% from the same period last year:

The decline in iPhone, Mac and iPad income is not surprising, mainly due to the global macroeconomic and high inflation. The interest rates have soared and borrowing consumption has fallen sharply in the face of repeated interest rate increases by the Federal Reserve.

Previously, according to data from research institutions, global mobile phone shipments fell 7.3% in the second quarter. Although high-end phones were less affected, they still faced a disadvantageous situation. The PC market is even more stretched, with global shipments fell 17% in the second quarter.

Under the poor environment, iPad has not made any major updates this year, which is difficult to stimulate consumers to buy, so there has been a higher-than-expected decline. Mac launched a new MacBook Air and professional desktops in June, driving Mac revenue to exceed market expectations.

Although overall revenue fell 1.4%, apple's net profit rose 2.3% in the third quarter of fiscal 2023 from a year earlier, significantly exceeding analysts' expectations.

The increase in net profit was mainly due to the improvement of Apple's profitability, with gross profit margin of 44.5% in the third quarter of fiscal 2023, the highest in nearly 10 years:

Surprisingly, the business that led to the increase in gross profit margin was products. In the third quarter of fiscal year 2023, the gross profit margin was 35.4%, an increase of nearly 1%over the same period last year, while the gross profit margin of the service business was 70.5%, down 1% year-over-year:

Looking ahead to the next quarter, Apple expects overall revenue growth to be similar to that in the third quarter, with growth in phones and services expected to accelerate from the third quarter, while Mac and iPad will experience double-digit declines.

The decline in Mac and iPad growth is mainly due to the postponement of demand from the third quarter to the fourth quarter due to factory shutdowns in the same period last year.

If Apple turns negative again in the next quarter, it will be the longest consecutive negative growth since 2000:

The cold winter is not far away, and Apple stock price has reached an all-time high, which is behind the sharp rise in Apple's valuation, but where can Apple's price-to-earnings ratio rise under the flagging data?