Apple
However, shares are lower as the company warned that supply chain issues will likely cost the company between $4 billion and $8 billion in the quarter. It also continued to not issue guidance due to uncertainties around the coronavirus and supply chain issues.
Apple's weakness also affected the broader market with the S&P 500
Inside the Numbers
In Q1, Apple topped EPS expectations at $1.52 vs $1.43. This was a 9% improvement over last year which is impressive but a deceleration from previous quarters. It also saw revenue growth of 9% as the company topped expectations at $97.3 billion vs. $93.9 billion.
Going into the report, there were concerns of a miss due to Chinese lockdowns and economic challenges, however, demand proved to be more resilient than expected. This might increase confidence among investors that iPhone demand is resilient to economic factors. Another positive was the approval of $90 billion in buybacks in 2022. Chinese sales actually increased 3.4%, and CEO Tim Cook said there was little sign of impact due to lockdowns.
It did note some weakness in Chinese demand due to the lockdowns and a negative impact from supply chain issues. Some longer-term concerns are the slowing in revenue and the possible impact of more inflation and weakness in the economy.
However, these issues impact all companies and Apple is much better insulated than other companies.
iPhone revenue beat at $50.6 billion vs estimates of $47.9 billion, a 6% increase. Services revenue was up 17% to $19.8 billion. The company's gross margins also topped estimates at 43.7% vs 43.1%.
Many see the company's newest growth engine as being its services business which comes with higher margins and stickier revenues. Investors tend to reward these with higher multiples. There are reports that the company might introduce a subscription product for its hardware products which could function in a similar way.
