Apple Q3 earnings saw India shine again: 5 takeaways from the results

Chief Executive Officer of Apple Tim Cook (centre R) looks on next to Apple employees cheering as a customer enters Apple's first retail store in India during its opening in Mumbai on April 18, 2023. Image: Punit Paranjpe / AFP
 
Apple on Thursday reported revenues fell for the third quarter in a row—compared with the corresponding year-earlier periods—amid an entrenched macroeconomic slowdown.
 
Revenue for the June quarter was $81.8 billion, down 1 percent from last year, but “better than our expectations,” CEO Tim Cook told analysts in a conference call on July 3. For some context, sales fell 5 percent in Q1 and 3 percent in Q2.
 
Sales in India continued to outperform, however, with a June quarter record, and the new stores in Mumbai and Delhi delivered better-than-expected performance during the three months ended July 1, the company’s fiscal third quarter.
 
“We continued to face an uneven macroeconomic environment,” CEO Tim Cook told analysts in a conference call on Aug 3. Here are five takeaways from Apple’s earnings results and commentary from Cook and CFO Luca Maestri on the call.
 

1. Switchers and services

iPhone sales, which make up about half of Apple’s revenue, came in at $39.7 billion for the quarter, down 2 percent from the year ago period. iPhone revenue grew on a constant currency basis, according to Apple.
 
“We had a June quarter record for switchers, reflecting the popularity of the iPhone lineup,” Cook said, referring to consumers shifting from Android phones to iOS. The company didn’t provide any additional details on switchers.
 
The three months through July 1 was also “an exciting quarter for services,” Cook noted. Services revenue reached $21.2 billion, an 8 percent year-over-year increase, exceeding Apple’s own estimates. The company set an all-time revenue record for total services and in categories including video, Apple Care, cloud and payment services.
 
Apple Pay, introduced almost a decade ago, isn’t available in India, yet, while rumours have been reported again in recent months that Apple might be working on introducing it in the country.

Also read: What drives the Apple craze? Just ask two Indian fans who met Tim Cook
 

2. India shines, again

The year 2023 marked an India milestone for Apple, with the opening of its first physical retail stores—in Mumbai and Delhi. These stores “exceeded our initial expectations,” Cook said. Sales in India, which have been incrementally growing, saw another quarterly record.
 
While not in Apple’s Q3, on July 13, Apple also unveiled a new clean energy initiative in India aimed at supporting social entrepreneurs to scale and refine their businesses to help them make a bigger impact on lower-income communities and protect the environment at the same time.
 
Financial details aren’t available, but Apple has partnered with Acumen, a New York-headquartered global non-profit venture capital (VC) fund that focuses on poverty alleviation projects. They were offering spots on the Energy for Livelihoods Accelerator where Acumen experts would lead a free 12-week programme designed to help social entrepreneurs. The window for applying to this first cohort closed on July 24.
 

3. Macbooks, iPads

Macbooks contributed $6.8 billion in revenue, down 7 percent year over year. Apple has completed the transition of its entire Mac lineup to run exclusively on its own processors, Cook said. The company introduced a new 15-inch MacBook Air during the quarter, and also launched the Mac Studio desktop with M2 Max and M2 Ultra processors and the Mac Pro with M2 Ultra.
 
iPad revenue was $5.8 billion for the June quarter, down 20 percent year over year, “in part due to a difficult compare because of the timing of the iPad Air launch last year,” Cook reported.
 

4. Enterprise customers

While Apple doesn’t break down revenue segment details in a more granular fashion, a less sexy segment is revenue from purchase of Apple products by business users, which is steadily making gains.
 
For example, global investment management firm Blackstone “is expanding its Apple footprint,” CFO Maestri said, from their corporate iPhone purchases to now offering the MacBook Air, with M2 chips, to all corporate employees and portfolio companies.

Also watch: WWDC 2023: From Vision Pro to MacBook Air, a round-up of Apple's major announcements
 
Gilead Sciences, a biopharmaceuticals company, “has deployed thousands of iPads globally” to its sales team over the last six months. It has also doubled its Mac user base by making MacBook Air available to more employees, he said.
 
In recent weeks, there have also been rumours reported in India that the Tata Group’s Air India might be expanding its adoption of Apple products. Tata Group is widely believed to have a deep partnership with Apple to expand iPhone manufacturing in India.
 

5. Outlook—slowdown to continue

Apple expects the current slowdown to continue into the rest of the year, if one were to infer from Maestri’s comments on the company’s outlook.
 
“We expect our September quarter year-over-year revenue performance to be similar to the June quarter,” he said. Assuming the macroeconomic outlook doesn't worsen, and that “foreign exchange will continue to be a headwind”, Maestri expects “a negative year-over-year revenue impact of over two percentage points”.  
 
That said, Apple expects iPhone and services year-over-year performance to accelerate from the June quarter, while revenue for both Mac and iPad will likely decline by double digits year over year due to “difficult compares”, from year-earlier periods.
 
He explained this as follows: Apple had supply disruptions from factory shutdowns in the June quarter a year ago and then fulfilled significant pent-up demand in last year’s September quarter. Therefore, the current quarter’s numbers will likely be lower in comparison with no such pent-up demand.