Apple would've grown in 'vast majority' of markets if not for FX headwinds: Cook

Lobro78

Apple (NASDAQ:AAPL) would've grown in the "vast majority" of the markets it operates on a year-over-year basis if not for the significant 800 basis point foreign exchange headwind, CEO Tim Cook said during the company's conference call on Thursday.

The iPhone and the Wearables, Home and Accessories business were the two segments most impacted by the foreign exchange headwinds, while the iPhone also dealt with supply constraints that lasted through most of December. Cook, noted, however, that iPhone production is now back to where Apple (AAPL) wants it to be.

The Mac segment, which generated $7.7B in revenue during the quarter, performed as expected, but faced a difficult year-over-year comparison after Apple (AAPL) launched the MacBook Pro M1 last year.

In January, Apple (AAPL) announced a new MacBook Pro and Mac mini, along with new M2 Pro and M2 Max chips.

The 62-year-old Cook also said that Apple (AAPL) is not immune to the broader macroeconomic challenges the globe is facing, but the company has the same approach it always does: manage for the long-term, adapt quickly and continue to deliver with excellence.

Cook also said Apple (AAPL) now has 935M paid subscriptions, up from 900M that it disclosed last month.

The company has also surpassed more than 2B active devices as part of its installed base.

On the conference call, CFO Luca Maestri said revenue for the March quarter is expected to be "similar" to the December quarter, which would mark an acceleration. It also expects foreign exchange to be a headwind and account for negative 5 percentage points.

Services revenue is expected to grow year-over-year, though digital advertising and mobile gaming will continue to see weakness. The iPhone is expected to accelerated sequentially, while the iPad and Mac are expected to decline double digits year-over-year.

Maestri also said that gross margins are expected to be between 43.5% and 44.5%, with operating expenses between $13.7B and $13.9B.

Cupertino, California-based Apple (AAPL) earned $1.88 per share on revenue of $117.15B during the first-quarter, as the iPhone accounted for $65.78B in sales, down from $71.62B in the year-ago period.

However, Apple's (AAPL) earnings and sales fell short of analysts projections for a profit of $1.95 per share on $121.65B in revenue.

Apple (AAPL) is likely to be without a design chief after long-time exec Evans Hankey departs the company later this year.

Comments

[jesser6584]

Profit only 1.85 per share?
They pay close to zero dividend.
Hoard cash.
Getting their lunch eaten by other cell and tablet ecologies.
Not convinced they will survive longterm.
Have not made a single worthwhile new product since Jobs died.

[AFCA 14]

@jesser6584 If there was a price for dumb comments you’d be a serious contender!
- no hoarding cash, buying back stock
- getting their lunch eaten? By whom? Don’t say Samsung!
- I’m sure they’ll file for bankruptcy before the end of the decade….
- Steve Jobs didn’t invent anything either. AAPL makes existing stuff better

[Mr Briggens]

It's like the football announcers say: "If he hadn't been tackled, he'd still be running".

[Djreef1966]

Well, Tim Apple has his own studio now, so why didn’t he call for the Special FX.

[El Scorcho]

Well that's a comforting moral victory

[8202371]

I really don't understand the fx issues at not only Apple but several others. I read everyday for quite a while now how the dollar is rapidly declining against other currencies. It was down under 1.02 today after being up to 1.14 or so a while back With this much of a drop is it a problem or an excuse at this point.

[Orangejulius]

@8202371 It's a little bit of both. The dollar only really started falling in early November, so results from the past 3 months will still show the Dollar's strength, resulting in poor performance due to forex. That said, there was legitimate weakness in sales due to a lack of demand for all mid to lower iPhone tiers. Apple failed to clarify this in the earnings call. They simply overproduced those low-mid phones and didn't produce enough of the high-end models, likely due to the supply constraints they pointed to that were exclusive to high-end models.

iPads and Macs will see a lot of weakness because there's little to no reason for someone to upgrade when the M2 based models are barely improved over the M1 models from a year before. It's like everyone has been saying; a great deal of Apple's 2020-2021 sales will not be repeated in 2022-2023. It may be the 2023 Q4 - 2024 sales cycle before we see growth normalize again.

[coKain]

@8202371 the USD was/is falling, but YoY comps are still worse.

[milehr]

@Orangejulius --iPads and Macs will see a lot of weakness because there's little to no reason for someone to upgrade when the M2 based models are barely improved over the M1 models from a year before.--

Somehow, you assume that everybody owning Apple devices upgrade at the same time. Not so. Of course, those with an M1 chip will not upgrade to M2 now, but some with Intel (which is still the majority of Mac users) might. Upgrades represent a certain percentage of the installed base, which is pretty constant. And we also need to consider folk using that god-awful MS Windows and other products, whose installed base is many times of Apple's. A lot of Apple's growth will come from that area.

[ghostblowfish]

Did anyone catch how the iPad will decline double digits year over year?

[Orangejulius]

@ghostblowfish Really not surprising at all. Ipads are the most cyclical product they sell. They oversold a ton of them 2020-2021 and demand has fallen off a cliff in the past 6 months. It'll be another year or two before everyone starts replacing those 2020-2021 models.

[Philipsonh]

FX headwinds ? That is why hedging currencies exists.I do not own Apple but am just commenting on Mr Cooks remarks.

[max cric]

How do they get 2B devices? There are no so consumers for their products.

[milehr]

@max cric --How do they get 2B devices?--
I have 7.

[John McCoy]

@max cric My company owns thousands of Apple devices.

[Eformula]

@milehr wtfff

[GERARDO15]

If! And only if tomorrow’s job report is total gridlock!! Apple, Amazon, META, GOOG and the rest of the Market is going higher!! Blessed!!

[MoneyPig]

Sounds bull****. It's easy to count volumes. FX issues, what? The phones are made in China. Sure revenue would get hit by stronger dollar, but Tim fails to mention VOLUMES.

And then, the last bull****er gives gross margins? We selling food here, it's EBITDA that matters bro. That's the measure of management, I am old school baby. Don't fall for that slight of hand.

You sell three products all of which can be held in ones hand and you don't report, VOLUMES. I am suspicious. Is Tim going to call someone from audience up on stage and make them levitate this year?

Doesn't sound good.

[Blowback2]

@MoneyPig I may be wrong as to what you're saying but I think they stopped reporting specific iPhone etc. numbers some years ago.

[goodfellasfinancial]

Market believes it, wait for 2h 2023

[arok79]

Way to spin it Tim Cook

[MoneyPig]

@arok79

Right? Same here. :)

[milehr]

The FX headwind will moderate soon enough, while China's opening will create a significant tailwind. The shares may decline tomorrow, but when the "shock" is absorbed and the investors realize the report's positivity, the stock will resume its climb in a couple of days.

[Winnertakesall]

@milehr Doubtful... my guess is China will be blocked off from the free world here shortly. War drums are beating....

[milehr]

@Winnertakesall
China is the world's factory and cannot be blocked anytime soon. And there will be no war with China, either. Also, there is no "free world" nowadays:-)

[Dukebailey]

Maybe I’m missing something, but the CFO projections would result in a massive beat in the current quarter on the top and bottom lines.

[Blowback2]

@Dukebailey Yep. And he deserves almost as much credit as Cook for the companies incredible performance over the years.

[djmv215]

COOK is cooking! SELL and run for the hill. BAD earnings now wait for the 2023 Q1 with full force of FED hike yet to felt! SELL

[dlr.rrx_00]

The dollar is currently weakening so here comes tail wind💨

[User 31614085]

@dlr.rrx_00 there will be another excuse next quarter..

[Stonesfan03]

"It's not fair!!!C'mon, Fx! You big bad meanie!" Tim Cook

[User 31614085]

maybe they should raise their prices in foreign markets then..or learn how to hedge.

[SaltBeard]

@MJL987 They did raise prices.

[User 31614085]

@SaltBeard not in all markets..China for one

[MoneyHypeMike]

lmao, so we should ignore FX when it's a tailwind?

[usernamerequiredtoo]

@MoneyHypeMike You should realize when FX changes really quickly, which is what happened the last half of last year. The U.S. dollar appreciated very quickly with rates rising so quickly

[Stefan Redlich]

@usernamerequiredtoo exactly, and now it is reversing similarly quickly so this is just a 2-3 quarter specialty, nothing to worry. Apple is my biggest position and will remain that. Stock will be green tomorrow I predict

[User 31614085]

@usernamerequiredtoo actually the dollar peaked vs most currencies in the Oct/Nov time period..been on a downward slide ever since

[InvestInMETA]

A near miss during this economic climate? Yeah, still a buyer. Yal bears go ahead and yuck it up, though. Small victories and all that…

[Legitimate]

@InvestInGAMA stock won’t hit a 15 PE for like 6 years at the CURRENT price. I don’t know the future, but this looks like a T type of stock for the next few years. It might be worth $120, maybe $100. I feel like this stock won’t outperform the market even if I’m wrong. Just an inference tho as it’s defied its valuation for 2-3 years now

[bostonbuster]

@Legitimate Agree . Everybody who wants an Apple device has one, slow growth from here.

[InvestInMETA]

@bostonbuster They have 22% of the international market. Plenty of growth left.