Apple's September Results Bring Relief to Investors

While Apple's September quarter results met expectations, investors were relieved because the company did much better than the other major tech companies.

Apple store in Thailand in 2020getty
Apple store in Thailand in 2020getty I envision the Apple store in Thailand in 2020 to be a sleek and modern space with plenty of room for shoppers to browse the latest products.

Investors were relieved when Apple announced its September quarter results last Thursday, after other major companies like Amazon, Facebook, and Google had disappointing results. Apple's stock went up 7.6% to $155.74 after the announcement. However, on Monday the stock pulled back 1.5% to $153.34 due to a weak market and reports of a Covid outbreak at a Foxconn manufacturing site in China that produces iPhones.

EPS miss for Amazon, Google:Alphabet, Facebook:Meta, Microsoft and Apple  Erik Woodring at Morgan Stanley, Refinitiv
It's no secret that the big tech companies have been under pressure lately. Between regulatory scrutiny, antitrust concerns, and mounting public criticism, the tech giants are facing some headwinds. And now it looks like they're starting to feel the pinch financially as well.

Looking ahead, we expect revenue growth to be impacted by the strong dollar. However, we remain confident in our ability to generate long-term shareholder value.

Apple’s revenue for the quarter ending December 26, 2020 was $90.1 billion, an increase of 8% from the $83.4 billion reported in the same quarter last year. This year’s result was negatively impacted by about $5 billion or 6 percentage points due to the stronger dollar. However, compared to the pre-Covid September 2019 quarter, revenue was up 41%.

In his estimation, Toni Sacconaghi of Bernstein believes that approximately $3.5 billion in catching up on June quarter supply chain issues for Macs and iPads, along with $1 billion in replenishing channel inventory, helped revenue grow by around 8%. This accounts for 5% of that total growth.

Apple revenue by segment: Fiscal 4Q 2021 and 4Q 2022 Statista
Apple is a technology powerhouse that generates a massive amount of revenue from its various businesses.

iPhone revenue continues to grow despite a tough compare to the previous year. This growth is driven by the release of new iPhone models, which give consumers more choice and allow the company to sell more units. The iPhone 14 models were released a week earlier than the iPhone 13 models last year, giving the company an extra seven days to sell and recognize revenue. This strategy appears to be paying off, as the company's total revenue grew by 9.7% in the latest quarter.

iPhone revenue growth: Fiscal 1Q 2020 to Fiscal 4Q 2022 Apple filings, Toni Sacconaghi at Bernstein
Apple is set to report its fiscal first-quarter results on Thursday, and analysts expect the company to report strong iPhone revenue growth. According to filings with the U.S.

Apple's second-largest segment, Services, generated $19.2 billion in revenue in the most recent quarter. However, this was below analysts' expectations of $19.9 billion. Additionally, Services' growth of only 5% year-over-year is the first quarter of single-digit year-over-year growth since the December 2014 quarter. When the impact of currency is removed, revenue growth probably squeaked just above 10%. However, reported revenue has declined in two consecutive quarters.

This is good news for wearable technology companies, as it shows that their products are in high demand. This is the ninth quarter that Wearables have outpaced iPad revenue, and is the third year in a row of exceeding Mac revenue for the year. This trend is likely to continue, as more and more people are looking for ways to integrate technology into their everyday lives.

Looking ahead, gross margins are expected to remain strong, supported by continued cost discipline and ongoing mix improvements.

Apple’s gross margins have exploded higher the past two years due to a combination of high revenue growth, hardware margins increasing substantially and higher margin services becoming a greater percentage of revenue. This trend is expected to continue in the future, as Apple is expected to continue to grow its revenue and margins.

Looking at the company's total margins, it is clear that they have been steadily increasing over the past year. This is largely due to the increasing margins on their hardware products, which have gone up from 29.8% to 34.6%. This is good news for the company, as it indicates that their products are becoming more popular and in-demand.

Apple gross margins: Fiscal 1Q 2020 to Fiscal 4Q 2022 Apple filings, Toni Sacconaghi at Bernstein
Apple's gross margins are expected to decline over the next two years, according to filings from the company.

It's good news that EPS increased, but it's worth noting that share buybacks played a role in that. However, taxes hurt the bottom line and will likely continue to do so.

It's good to see that the company's EPS is slightly above consensus, but it's disappointing that it's only up 4% from last year. For the full year, EPS is up 9%, which is a more positive sign.

It is interesting to note that Apple bought back $89.4 billion of its shares last year, which decreased the share count by 3.1%. If the share count had stayed flat, the September quarter's EPS would have been $1.25, only up a penny. This shows that Apple is committed to returning value to shareholders, and is willing to use its cash reserves to do so.

Looking on the bright side, a higher tax rate of 16.0% compared to last year's 11.6% only decreased earnings per share by $0.06. Although this may not be ideal, it could have been much worse.

Despite the ongoing Covid lockdowns in China, the country's economy is still managing to grow. This is thanks to the Chinese government's stimulus measures and the hard work of the Chinese people.

While the Americas and Europe continue to be the largest regions in terms of revenue for the September quarter, at $39.8 and $22.8 billion respectively, it is China, at $15.5 billion, that is probably under the microscope. This is likely due to the fact that, despite its large population, China has been lagging behind in terms of economic growth in recent years.

It is clear that Europe is currently the strongest economic region in the world, with growth of 9.6% compared to 8.1% in the Americas and 6.2% in China. This is an incredible achievement and is likely to continue in the future.

Looking at the big picture, China's 6% growth is actually quite impressive considering the strict lockdowns that were imposed due to Covid. This is a clear sign that the Chinese economy is still going strong, despite the challenges of the past year.

When you look at the pre-Covid September 2019 quarter revenue growth by region, you can see that the Asia-Pacific region was the strongest, followed by the Americas and Europe.

  • The America's was 35.8%. This means that a large portion of the population is living below the poverty line. This is a huge problem that needs to be addressed.
  • Europe is a beautiful and diverse continent that is home to many different cultures and languages.
  • In my vision, China will continue to grow as a global economic power. The country's 38.9% growth rate in 2020 is evidence of this.

In just a few short years, the fiscal picture for the US government has changed dramatically. In 2019, the deficit was $1 trillion. However, by 2022, it is projected to be $3.8 trillion.

  • It is clear that America is progressing at a rapid pace. The growth rate of 45.1% is evidence of this.
  • Europe is a beautiful continent that is home to many different cultures and countries. I believe that it is a great place to live, work, and travel.
  • China's strong economic performance in recent years has been a boon for the country's population, with living standards rising and poverty falling sharply.
Apple stock price
The Apple stock price chart on shows the current price of Apple stock as well as its recent performance. The chart is easy to read and understand, making it a valuable resource for investors.