Apple's total net sales rose 8.6% to $97.3bn, reflecting growth across both Products and Services. This was better than the market expected. Operating expenses rose 18.9% to $12.6bn, but despite this, operating profit rose to $30bn from $27.5bn.
There was a 5% increase in the dividend, with a payment of $0.23 per share announced. The group also upped its share repurchase scheme by $90bn.
Shares were down 2.5% following the announcement.
View the latest Apple share price and how to deal
Our View
Despite enormous macroeconomic pressure, Apple's delivered another round of record growth. That's hard to do in normal times, let alone amid the current macroeconomic backdrop. The incredible performance comes down to Apple's nail-on-the-head new product launches.
Hardware sales are Apple's bread and butter. iPhones alone make up over half of net sales. Apple has to keep the upgrade cycle going if it wants to boost the more profitable services division in the long-term (more on that later).
The sales increase is testament to Apple's biggest asset - its brand. The sheer scale of Apple's sales is testament to the grip that the shiny embossed piece of fruit has on global consumers. The unbendingly loyal customer base means that there's an element of revenue visibility other businesses simply don't have.
The powerful brand is also helping Apple stand strong in the face of rising inflation. Most big-ticket items are quickly rubbed off shopping lists as money loses its value, but there's an army of Apple fans who are likely to keep the next iPhone clearly in their sight. And such is Apple's strength, it seems to be avoiding the worst of the inflation-linked tech sell off some of its peers have faced.
Apple's looking to capitalise on its legions of fans with its Services business. The division makes up a growing part of the total. At this rate, it will be responsible for a quarter of revenue in just over a year. It makes money from charging subscriptions for various services and gets fees from app developers to use the App store. Service margins are higher and revenues should be more reliable - which all being well will take the pressure off the group to deliver constantly rising hardware sales in the future.
There are some reasons for caution. Apple's operating model relies on an incredibly short production cycle, as competition in the hardware space is stiff. And competitors are closing the gap. Some have an even larger installed product base and offer better prices. If Apple's brand ever slips - like we've seen with some heavily branded clothes - the shine would very quickly rust on that tiny famous apple.
Compared to less hardware focused FAANG peers, Apple is also a lot more exposed to supply chain disruption. It's managed to navigate the problems very well, but hasn't escaped unscathed. If conditions deteriorate there could be a harsh reaction from demanding investors. Add in questions from some shareholders about forced labour and carbon footprint concerns and it becomes clear that while the Apple is still plenty good enough to eat, there's some potential for bruising.
Overall, we think Apple's core remains strong, but future spoils still rely on growing higher-margin areas of the business while also creating another generation of coveted products. Looking at the latest numbers it would seem so far, so good, on that angle. But remember there are no guarantees.
Apple key facts
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
A connected party of the author holds shares in Apple
Second Quarter Results
There has been a good response to new products, according to management. This fed into a 5.5% increase in iPhone sales to $50.6bn. Mac sales grew 14.6% to $10.4bn, although iPad sales fell 2.0% to $7.6bn. Wearables, Home and Accessories rose by just under $1bn to $8.8bn.
Services revenue rose just under $3bn to $19.8bn.
There was growth in every geographic region, except the Rest of Asia Pacific. Apple's biggest market, the Americas, saw net sales of $40.9bn, up 19.2%, while Europe was more tepid, rising 4.6% to $23.3bn. Greater China revenues rose just over $615m to $18.3bn. Japanese performance was broadly flat.
Apple had net debt of $61.5bn at the end of March, and free cash flow of $69.8bn.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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