Apple revenue drops 1% in Q3 2023, iPhone sales decline but services revenue keeps up

Apple’s revenue for fiscal Q3 2023 marked a drop for the third consecutive quarter, coming on the back of a slide in the sales of the iPhone – its flagship smartphone – for the same period. The company’s revenue for the period dropped by 1.4% year-over-year to $81.79 billion, while revenue from iPhone sales dropped to $39.67 billion for the quarter.

Nonetheless, the Cupertino-headquartered Apple managed to beat Wall Street estimates for its sales and earnings per share – its EPS beat the estimated $1.19 to reach $1.26 for the quarter. The estimated revenue for the same period was $81.6 billion. Analysts estimated its revenue from its iPhone to amount to $39.91 billion for the quarter, which Apple failed to beat. It is unsurprising though, given the overall decline in the global smartphone market in recent quarters.

Its profit for the third quarter rose by 5% year-over-year to reach $19.88 billion, while revenues from the other products – the Mac and the iPad – continued to clock an annual decline. Revenue from the Mac beat analyst estimates to reach $6.84 billion (marking a decline of 7%), while revenue from its iPad clocked a steep decline of 20% to reach $5.79 billion (failing to reach the estimated $6.41 billion). Revenue from its Wearables, Home, and Accessories unit rose to $8.28 billion as well. The company had unveiled the 15-inch MacBook Air, the new M2 Mac Studio, and the first-ever Apple Silicon Mac Pro in Q3 2023, and CEO Tim Cook said that almost half of the Mac buyers during the quarter were new to the product.

For the nine months ended July 1, its total net sales dropped YoY to reach $293 billion, while its net income for the same period dropped to $74 billion. Its gross margin and operating income for the same period amounted to $128.7 billion and $87 billion respectively, while the same metrics for Q3 2023 amounted to $36.4 billion and $23 billion respectively. Currently, Apple has 1 billion subscribers on its platform, which includes both Apple services and third-party apps, marking an increase from 975 million a quarter ago.

Apple’s net sales in the Americas declined to $35.3 billion, while the same in its greater China region rose to $15.76 billion for the quarter, something that Cook attributed to Apple having attracted “a quarterly record of switchers to the iPhone, as well as having a strong upgrader activity”. He went on to add that Apple had set quarterly records in China for both wearables, home and accessories, and services.

“We are happy to report that we had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone,” Apple CEO Tim Cook commented on the company’s earnings. “From education to the environment, we are continuing to advance our values, while championing innovation that enriches the lives of our customers and leaves the world better than we found it.”

“Our June quarter year-over-year business performance improved from the March quarter, and our installed base of active devices reached an all-time high in every geographic segment,” said Luca Maestri, CFO at Apple. “During the quarter, we generated very strong operating cash flow of $26 billion, returned over $24 billion to our shareholders, and continued to invest in our long-term growth plans.”

The company’s shares fell more than 2% in extended trading, and are currently priced at $119.71 per share. Apple’s services unit was the bright spot in the mixed bag that is Apple’s earnings for the third quarter, beating analyst estimates of $20.76 billion to rise to $21.2 billion during the quarter. Going forward, however, the path seems dim for the tech titan, which forecast that the slump in its sales will continue into the current quarter to make it the fourth quarter in a row of dropping sales.

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