Apple (Nasdaq: AAPL) delivered strong fiscal Q3 earnings that topped nearly every metric relative to expectations. Further, every one of Apple's product lines had more than 12% revenue growth. However, shares were flat as the company warned about chip shortages possibly impacting production in the second-half of the year. Further, there is also a belief that the company's earnings may have hit a short-term peak which would also explain the stock price's underwhelming reaction.
Inside the Numbers
In its fiscal Q3, Apple reported $1.30 in earnings per share while analysts were forecasting $1.01 per share. Revenue also beat by a significant margin at $81.4 billion vs expectations of $73.3 billion, a 36% gain over last year.
In terms of various units, iPhone revenue beat at $39.6 billion vs $34.0 billion. This was nearly 50% higher than the same quarter last year. Services continue to grow at 33% compared to last year with revenue coming in at $17.5 billion. Gross margins also topped expectations at 43.9% vs 41.9%.
The company didn't provide guidance which it has chosen not to do since the beginning of 2020 due to uncertainty stemming from the pandemic. However, in the company's conference call, management warned that the next quarter could see a slowdown in growth due to supply constraints.
CEO Tim Cook also added that the quarter could have been even better without supply shortages which negatively impacted Mac and iPad sales. He also added that the company noted that many Android users were switching to the iPhone. The company continues to be optimistic about its Services business which now includes 700 million paid subs.
Stock Price Outlook
It's simply remarkable that Apple is able to maintain this growth rate despite being the biggest company in the world. It's also maintaining its margins despite inflationary pressures. The Apple ecosystem continues to grow at a rapid rate as evidenced by the 33% growth rate of its Services business which is already nearly 20% of total revenue.
It continues to be a high-quality option for investors to put their money to work as the valuation remains attractive, and the company continues to reward shareholders with its dividend and share buybacks. Further, the company doesn't have any competition in the smartphone market and is actually gaining market share.