Apple (AAPL) Q3 earnings: Live updates

Apple’s earnings call just wrapped up. Thanks for joining CNBC’s live coverage.

Apple CFO Luca Maestri said on the company’s earnings call that investors could expect September quarter sales results to be similar to its June quarter performance, where overall revenue fell over 1% year-over-year.

In Apple’s 2022 fourth quarter, it reported $90.15 billion in sales. If that were to decline 1%, as the company’s finance chief suggested, Apple would report about $89.25 billion in sales in the current quarter.

Refinitiv analysts were projecting fourth-quarter revenue for the company of $90.19 billion. — Kif Leswing

Apple CFO Luca Maestri just provided data points about how the company sees its September quarter. He said that results would show a similar year-over-year revenue decline as the current quarter, which saw sales fall over 1%.

However, he forecast that iPhone sales would do better than their 2% decline in June quarter, and the already strong growth rate of Apple’s Services division would be even higher in the following period.

Sales of iPads and Macs will fall by double-digit percentages, he added.

Apple shares were down about 2% in extended trading.

Here’s what he said:

“We expect our September quarter year-over-year revenue performance to be similar to the June quarter assuming that the macroeconomic outlook doesn’t worsen from what we are projecting today for the current quarter.

Foreign exchange will continue to be a headwind and we expect a negative year-over-year revenue impact of over 2 percentage points.

We expect iPhone and services year-over-year performance to accelerate from the June quarter.

Also, we expect the revenue for both Mac and iPad to decline by double digits year over year due to difficult compares, particularly on the Mac.

For both products, we experience supply disruptions from factory shutdowns in the June quarter a year ago, and we’re able to fulfill significant pent-up demand in the year-ago September quarter.

We expect gross margin to be between 44 and 45%. We expect OpEx to be between $13.5 and $13.7 billion.”

— Kif Leswing

The services business is traditionally much smaller in terms of sales than Apple’s hardware, but it’s more consistent from quarter to quarter and has less seasonal variation.

You can listen on Apple’s website, or keep it here for the highlights from Cook and Maestri. — Kif Leswing

Apple reported its third straight quarter with a revenue decline on Thursday.

One theme that’s largely missing from Apple’s report this quarter is artificial intelligence. While the rest of the industry talks about AI models like ChatGPT and what they’re doing to sell similar technologies, Apple has talked about it far less, because it’s a product company, and doesn’t really sell developer tools like cloud computing.

But in an interview with CNBC on Thursday, Cook said that Apple has been working on generative AI and other models for years.

“We view AI and ML as fundamental core technologies. And they are virtually embedded in every product that we build,” Cook said.

“On a research basis, we’ve been doing research on AI and machine learning, including generative AI, for years,” he added. — Kif Leswing

Apple in June revealed the Vision Pro, a virtual reality headset. The company calls Vision Pro its first “spatial computer” that can integrate computer graphics with the real world.

Consumers who want to try the device out and check out what it’s all about may not have to wait much longer. Cook told CNBC that the company plans to do demos of the headset in its stores.

“We’re going to do demos in the store similar to what you went through,” Cook told CNBC’s Steve Kovach, referring to a demo provided to the media after the Vison Pro was announced.

“I’m sure we will be overrun for a while with requests versus the supply of demo,” Cook continued. “But we see the retail operation as a huge competitive advantage for rolling out a product like this or for that matter, any product that’s a new category.”

Cook said that it was important that Apple controls the demos, at least to start out.

“I think it’s really important that we control the process and the demos.. And we can do that better, frankly, with our own folks,” Cook said. — Kif Leswing

Apple’s performance in greater China, which includes Hong Kong and Taiwan in addition to the mainland, was another highlight.

Sales in the region grew 8% from the year-earlier period to $15.76 billion, after slipping last quarter. It’s Apple’s third largest sales region and Cook said he’s seeing “definite acceleration.” 

“The drivers of that are we did really well in switchers for iPhone during the quarter. We believe, based on the reports we’ve seen, that we gained share in the smartphone industry for the quarter in China,” Cook told CNBC.

— Kif Leswing

Apple now has $166.54 billion in cash on hand, according to the company’s fiscal third-quarter earnings report released Thursday.

The figure is just slightly above the company’s cash pile from its fiscal second quarter of 2023, when it reported $166.33 billion. However, it’s a drop from the $179.31 billion Apple reported during its fiscal third quarter in 2022.

Apple regularly maintains one of the largest cash piles in the U.S.

Analysts were expecting the company to post its third consecutive year-over-year decline in quarterly revenue, according to FactSet estimates, with a fall off in sales of iPhones, iPads, Macs and Wearables. Apple’s stock is up around 47% year to date.

— Ashley Capoot

When asked if he was concerned about Fitch Ratings cutting the U.S. currency issuer default rating earlier this week, Apple CEO Tim Cook told CNBC’s Steve Kovach, “It’s not something I’m deeply concerned about.”  

Warren Buffett made similar comments on Thursday. “There are some things people shouldn’t worry about,” Buffett said. “This is one.” 

— Kif Leswing

Apple had previously suggested that the third quarter would see overall sales shrink, partially due to the macroeconomic outlook. Apple’s results are stronger than what it had implied in May, suggesting the tech giant sees overall economic conditions improving. 

 “We will talk about the outlook for September,” Apple finance chief Luca Maestri told CNBC’s Steve Kovach. “Directionally, it should get a bit better.” 

 Apple’s earnings call kicks off at 5 p.m. ET and we’ll blog it here. 

— Kif Leswing

Apple’s hardware sales were less robust in a challenging time for the overall smartphone and PC markets, which are both slumping overall. The iPhone maker also faced a strong dollar, CFO Luca Maestri said, and without the effect from foreign currency, Apple would have actually grown overall revenue.  

Sales of iPhones fell 2% to $39.67 billion, but Apple said that it saw a high number of “switchers,” or people who have moved from an Android device to an iPhone, especially in China. 

 “The smartphone industry is tough in the U.S. right now,” Cook told CNBC’s Steve Kovach.  

Sales of iPads suffered during the quarter, falling 20% year over year. The company attributed the decline to a difficult comparison to last year, which came after it had updated its $600 iPad Air.  

Macs’ revenue fell 7% year over year to $6.84 billion, but category sales over the past two years have been elevated because of work-from-home trends during the pandemic, as well as Apple’s transition to its own chips, which spurred a lot of upgrades. CEO Tim Cook said he wasn’t going to predict a bottom for the PC market, but that Apple was pleased that the decline wasn’t larger.  

The only line of hardware to grow was Apple’s other products division, called “Wearables.” This includes sales from Apple Watches, headphones like AirPods and Beats, and accessories. It grew 2% year over year to $8.28 billion.

— Kif Leswing

Apple’s Services division revenue was the highlight of its report. The business is extremely profitable, and important for investors because it signals how Apple is monetizing its active base of 2 billion devices by selling them subscriptions, streaming TV, warranties, advertising, payment services, and other products included in the category. 

Services revenue jumped 8.2% year over year, stronger than the 5.5% growth rate posted last quarter — showing the business has accelerating growth, a key result that investors were eager to see. 

Cook said that many of the division’s components were growing. 

“We set revenue records in many categories in Services this quarter from video, to AppleCare, to cloud, to payment services, and we set June quarter records for advertising, the App Store and Apple Music,” Cook said. He added that App Store growth has accelerated.  

Cook said that Apple has over 1 billion paid subscriptions. That’s a stat that Apple uses to measure both people subscribing to services like Apple Music or Apple TV, as well as anyone who subscribes to a service through the company’s App Store.  

“That’s up 150 million year over year and nearly double what it was just three years ago,” Cook said. 

— KIf Leswing

Apple could talk a bit about how its suppliers are continuing to expand beyond China, which may help it alleviate future risks, like the bottlenecks it experienced in the country in recent quarters.

During Apple’s fiscal first quarter, for example, Apple sales fell 5%, the largest quarterly revenue drop since 2016. Cook said three factors hurt the results: a strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment. Beijing’s strict Covid restrictions have particularly hurt production by forcing workers out of factories, Apple warned last fall.

Apple has been working to diversify its supply chain outside the country.

Foxconn is one of the tech giant’s largest suppliers and has broken ground on new facilities in India. Apple partners have also reportedly started producing products in other countries like Vietnam.

— Rohan Goswami

Heads up that Amazon is also posting earnings after the bell. We’re going to be covering those numbers right here when they drop. The results will cover results from its annual Prime Day bonanza, which it said was its “biggest ever.” Analysts are keeping an eye on cloud revenue growth, retail margins and anything the company has to say about artificial intelligence.

Don’t expect Apple to talk a lot about artificial intelligence the way its peers have.

On recent earnings calls, Alphabet CEO Sundar Pichai and his team said “AI” 66 times. Microsoft CEO Satya Nadella and his execs said it 47 times. Meta CEO Mark Zuckerberg and the Facebook executive team said the magic phrase 42 times, according to a CNBC analysis of each company’s earnings call transcripts.

As I explained recently, Apple’s approach to AI as a core underlying component instead of the future of computing represents a way to present the technology to its consumers. It’s just not core to its services the way Microsoft Copilot could boost subscription revenue or artificial intelligence could improve Google’s search business.

Apple’s a product company.

— Kif Leswing

Just for a real quick reference before the numbers drop later this afternoon, here’s how Apple did during the fiscal third quarter last year compared to 2021:

• EPS: $1.20 vs. $1.16 estimated, down 8% year over year
• Revenue: $83 billion vs. $82.81 billion estimated, up 2% year over year 
• iPhone revenue: $40.67 billion vs. $38.33 billion estimated, up 3% year over year
• Services revenue: $19.60 billion vs. $19.70 billion estimated, up 12% year over year
• Other Products revenue: $8.08 billion vs. $8.86 billion estimated, down 8% year over year
• Mac revenue: $7.38 billion vs. $8.70 billion estimated, down 10% year over year  
• iPad revenue: $7.22 billion vs. $6.94 billion estimated, down 2% year over year 
• Gross margin: 43.26% vs. 42.61% estimated 

— Kif Leswing

Sometimes, when an Apple product category underperforms, it’s valuable to consider the models Apple is currently selling. Oftentimes, that product category is getting ready for a refresh, or the last generation didn’t offer a big jump in capabilities.

iPad sales are expected to come in at $6.4 billion, according to a Refinitiv consensus estimate. That would be an 11% drop from last year.

Let’s look at the products:

Apple’s lowest-priced iPad launched in September 2021. It’s still for sale and costs $329. There’s also the 10th generation iPad that came out in October 2022. It costs $449 and, as CNBC said in its review, is worth the extra $120 for the updated design and better screen.

Apple’s two most expensive iPads, the iPad Pro, were also updated last October. Reviewing the larger model, CNBC praised the faster M2 chip, but noted that it can “get expensive at the high end,” citing a configuration that costs $2,400 (the entry level starts at $1,099.)

Apple’s middle-priced devices, the iPad Air and iPad Mini, were updated in March 2022 and September 2021, respectively, and Apple is reportedly preparing new models to boost sales again.

So, in this case, a few things could be happening. There’s a bit of a price increase on the low end unless you want an older iPad, which might make it less attractive, and new iPads are on the horizon. But Apple’s iPad also had a strong 2021, still benefiting from pandemic sales, and a flat 2022. Apple dealt with parts shortages in Q2 that hurt the supply of the Mac and iPad, too, causing iPad sales to fall 13% last quarter.

— Kif Leswing

Apple’s stock is up 48% so far in 2023 as investors value the company’s strong cash flow. Still, Wall Street will watch the company’s forecast data points closely to see what demand looks like in the second half of the calendar year, Apple’s fiscal fourth quarter, and then its first quarter of fiscal 2024, which is the holiday season.

That’s when investors could see sales from new iPhones, new Apple Watches and whatever else Apple releases before the end of the year.

By comparison, Apple shares were up just 6.4% YTD on this day last year, 11% YTD in 2021 and 48% YTD in 2020. It’s looking like a solid year so far, but it’ll need to keep chugging to match some of its better years.

Apple stock finished 2020 up 81% and 2019 up 86%, for example. And it closed 2009 up 147% and it finished up 133% in 2007, the year the iPhone was launched. — Kif Leswing

Apple could also give updates on how it sees the Indian market. CEO Tim Cook traveled to the country in April, and it became one of Apple’s top five iPhone markets during the quarter. China will also be a focus after two straight quarters with sales decline and questions about the company’s economic recovery after it lifted Covid lockdowns earlier this year. — Kif Leswing

The June period is typically Apple’s slowest quarter of the year, while its fourth fiscal quarter — the September quarter — captures back-to-school laptop spending, and sometimes, a few days of new iPhone model sales, depending on when new devices go on sale.

In Apple’s fiscal Q3 2022, for example, Apple reported $83 billion in revenue, up 2% year over year. But in its September quarter, fiscal Q4, it reported $90.15 billion in revenue, up 8.1% from a year earlier.

— Kif Leswing