Apple (APPL) Q3 earnings: Live updates

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