Apple's Q4 results show growth in 'interesting times'

We're born for interesting times, but with new records Apple management impresses and disappoints. Predicts 'deceleration' of growth into December.

Apple, results, iPhone, iPad, services, Mac, Tim Cook

Apple remains the most resilient FAANG business. While other big tech firms (like Alphabet and Microsoft and Facebook) report grim news, Apple managed to set fresh records, increased Android-to-iPhone switching numbers, but still slightly missed expectations.

The company reported its Q4 earnings late Thursday.

Decent results in a terrible week in tech

Overall, Apple’s quarterly results were decent in what was an otherwise terrible tech week. Total sales hit a new record $90.1 billion, up 8% YoY for earnings of $1.29 per share.

Wall Street’s consensus expectations had hovered around 88.9 billion for $1.27 per share. (It is worth noting that estimates from Morgan Stanley’s new Apple analyst, Erik Woodring, came closest of all). Gross margins hit 42.3%.

However, relative weakness in some segments speak to the challenges we all face. “We are still living through unprecedented times,” CEO Tim Cook said, citing economic challenges, war in Ukraine, COVID-19, and climate-related crises. "The world continues to be unpredictable."

On an annual basis, revenue reached a new record $394.3 billion, up 8%.

Despite challenges, net sales increased in every region except Japan — with new records in India. Apple also increased revenue in every segment, except iPad, though the rate of growth in some areas seems in flux.

The strong dollar isn’t good everywhere

Looking forward, company execs seemed as confident as anyone can be in such a febrile economic environment. “Revenue performance will decelerate during the December quarter,” they warned, citing foreign exchange fluctuations as one big barrier.

In a more stable currency environment in which foreign exchange challenges had not reduced revenues by 600 basis points, Apple would have delivered better than 14% YoY revenue growth.

As it is, in the upcoming quarter, management suggested 8% YoY growth. It may help that Apple’s December quarter will be one week longer than usual.

What happened to iPhone sales?

iPhone sales came in lighter than expected, but the slight softness was more than compensated for by strong Mac sales. The company no longer breaks out numbers, but reported iPhone sales of $42.6 billion, up 9.7% but slightly under consensus expectations for $43.4 billion in sales. That’s still way ahead of the wider smartphone industry — Apple is generating share in comparison.

We have heard speculation that consumers who are purchasing iPhones are choosing to invest in the Pro devices, above the standard range, which does hint that overall sales numbers may have declined a little, in line with the wider industry trend. (This is offset by a higher average spend per user.)

“We had three of the top four smartphones in the US, in the UK, the top three in urban China, the top six in Australia, four out of the top five in Germany and the top two in Japan," he said. "Customer satisfaction for the iPhone remains very, very strong at 98%.

"We feel very good about how we performed in Q4 and the certainly the start of this generation [of iPhone] would suggest that we're going to be constrained for a little while on the 14 Pro and 14 Pro Max, but we're working very hard to try to remedy that,” said Cook.

Services income grows, pace slows

Services income reached $19.2 billion, up 5%. Analysts were disappointed, given the double digit growth we’ve seen in the category so far. They had anticipated $20.1 billion.

The good news is that Apple now has more than 900 million subscribers to its services, up 155 million in the last 12 months. Apple CFO Luca Maestri pointed out that digital advertising and gaming were weak.

Apple recently increased prices across some of its services. It claims this reflects higher levels of music royalty.

That decision, combined with what appears to be slowing pace of growth in the segment, suggests the company may soon need to grapple with the problem of churn, as consumers face multiple challenges. Though Apple did explain that in the context of stable foreign currency exchanges the segment would have delivered double-digit growth.

It's worth noting that Apple is expected to widen its catalog of available sports entertainment programming on TV+, which may help both boost sign-ups and mitigate churn.

Mac sales - the best quarter Apple has ever seen

Mac sales climbed an impressive 25%, reaching $11.5 billion. “It was the best quarter [for the Mac] we’ve ever had in the history of the company,” said Cook.

He said a backlog of Mac demand the company was unable to fulfil in Q3 because of Covid-related factory shut downs did help boost Apple’s Q4. But he also pointed to strength in sales from the introduction of the M2 MacBook Air.

iPad sales decline

iPad revenue was $7.2 billion. That’s down 13.1%. To explain this, Cook tried to argue that while new iPads were introduced in time to impact results in the year-ago quarter, this was not the case this year, with iPads introduced in October.

One positive point Apple management highlighted: the iPad installed base is now at its highest —and that over half of those purchasing iPads during the quarter were new to the product.

Apple Watch, AirPods and more

Wearables and accessories reached $9.6 billion, up 9.8%. Cook confirmed the new Apple Watch Ultra has been popular, confessing that supply of the device remains constrained.

Strong green shoots for future growth

Beyond the standard numbers, Apple threw in some highly significant nuggets of information. It continues to generate healthy sales to people new to its offerings. More than 50% of iPad sales and “over two-thirds” of Apple Watch sales went to consumers who had never owned one of those products before.

It also generated record sales in India and increased revenues in China. Sales also doubled in Thailand, Vietnam, Indonesia, and Mexico, proving the company’s focus on expanding its markets.

What one analyst says

“Like other major tech companies, even Apple is suffering from the negative impact of a worsening macro backdrop and ongoing supply chain woes, though it has done a better job of navigating through the challenging environment,” said Jesse Cohen, senior analyst at

What’s coming next?

From the balance sheet, it’s clear that Apple continues to invest in the next big thing(s). Research and development spending hit $6.7 billion in the quarter, up from $5.7 billion a year ago. Spending on this has reached $26.2 billion, up from $21.9 billion. It’s hard not to imagine Apple’s working on something — particularly as the company continues to make around “one acquisition per month," according to Cook.

“As we head into the holiday season with our most powerful lineup ever, we are leading with our values in every action we take and every decision we make," Cook said. "We are deeply committed to protecting the environment, to securing user privacy, to strengthening accessibility, and to creating products and services that can unlock humanity’s full creative potential.”

Investors get…

Apple’s board of directors has declared a cash dividend of 23 cents per share of the Company’s common stock. 

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Copyright © 2022 IDG Communications, Inc.

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