Stores in Mumbai and Delhi exceeded expectations, CEO Tim Cook said, while "switchers" and services, globally, came to the rescue amid the macro slowdown
Apple on Thursday reported revenues fell for the third quarter in a row—compared with the corresponding year-earlier periods—amid an entrenched macroeconomic slowdown.
Revenue for the June quarter was $81.8 billion, down 1 percent from last year, but “better than our expectations,” CEO Tim Cook told analysts in a conference call on July 3. For some context, sales fell 5 percent in Q1 and 3 percent in Q2.
Sales in India continued to outperform, however, with a June quarter record, and the new stores in Mumbai and Delhi delivered better-than-expected performance during the three months ended July 1, the company’s fiscal third quarter.
“We continued to face an uneven macroeconomic environment,” CEO Tim Cook told analysts in a conference call on Aug 3. Here are five takeaways from Apple’s earnings results and commentary from Cook and CFO Luca Maestri on the call.
“We had a June quarter record for switchers, reflecting the popularity of the iPhone lineup,” Cook said, referring to consumers shifting from Android phones to iOS. The company didn’t provide any additional details on switchers.
The three months through July 1 was also “an exciting quarter for services,” Cook noted. Services revenue reached $21.2 billion, an 8 percent year-over-year increase, exceeding Apple’s own estimates. The company set an all-time revenue record for total services and in categories including video, Apple Care, cloud and payment services.
Apple Pay, introduced almost a decade ago, isn’t available in India, yet, while rumours have been reported again in recent months that Apple might be working on introducing it in the country.
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While not in Apple’s Q3, on July 13, Apple also unveiled a new clean energy initiative in India aimed at supporting social entrepreneurs to scale and refine their businesses to help them make a bigger impact on lower-income communities and protect the environment at the same time.
Financial details aren’t available, but Apple has partnered with Acumen, a New York-headquartered global non-profit venture capital (VC) fund that focuses on poverty alleviation projects. They were offering spots on the Energy for Livelihoods Accelerator where Acumen experts would lead a free 12-week programme designed to help social entrepreneurs. The window for applying to this first cohort closed on July 24.
iPad revenue was $5.8 billion for the June quarter, down 20 percent year over year, “in part due to a difficult compare because of the timing of the iPad Air launch last year,” Cook reported.
For example, global investment management firm Blackstone “is expanding its Apple footprint,” CFO Maestri said, from their corporate iPhone purchases to now offering the MacBook Air, with M2 chips, to all corporate employees and portfolio companies.
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Gilead Sciences, a biopharmaceuticals company, “has deployed thousands of iPads globally” to its sales team over the last six months. It has also doubled its Mac user base by making MacBook Air available to more employees, he said.
In recent weeks, there have also been rumours reported in India that the Tata Group’s Air India might be expanding its adoption of Apple products. Tata Group is widely believed to have a deep partnership with Apple to expand iPhone manufacturing in India.
“We expect our September quarter year-over-year revenue performance to be similar to the June quarter,” he said. Assuming the macroeconomic outlook doesn't worsen, and that “foreign exchange will continue to be a headwind”, Maestri expects “a negative year-over-year revenue impact of over two percentage points”.
That said, Apple expects iPhone and services year-over-year performance to accelerate from the June quarter, while revenue for both Mac and iPad will likely decline by double digits year over year due to “difficult compares”, from year-earlier periods.
He explained this as follows: Apple had supply disruptions from factory shutdowns in the June quarter a year ago and then fulfilled significant pent-up demand in last year’s September quarter. Therefore, the current quarter’s numbers will likely be lower in comparison with no such pent-up demand.