Two weeks ago, Apple reported a solid FY3Q22 (April to June) given the tough year-over-year compare and considerable FX headwind. In terms of good news, supply chain issues, component shortages, and COVID-related headwinds appear to have bottomed for Apple. When it comes to bad news, some parts of Apple’s business are getting hit by inflation and slowing economic growth more than others.

Here are Apple’s reported 3Q22 results versus my expectations with brief commentary for each item.

Revenue: $83.0 (vs. my $85.9B estimate). Results missed my estimate due to a larger than expected headwind from FX, a larger than expected supply shortage with Mac, and macro issues impacting Wearables, Home, and Accessories.
EPS: $1.20 (vs. my $1.25).
iPhone revenue: $40.7B (vs. my $39.9B). That’s a good iPhone revenue number that doesn’t raise any yellow or red flags to me.
Services revenue: $19.6B (vs. my $20.1B). Results missed primarily on a larger than expected headwind from FX.
Wearables / Home / Accessories revenue: $8.1B (vs. my $9.4B). This was a weak number which Apple attributed to a “cocktail of headwinds.”
Mac revenue: $7.4B (vs. my $8.9B). Apple experienced major issues with supply as the Mac was the product category impacted the most by COVID lockdowns closing factories in China.
iPad revenue: $7.2B (vs. my $7.6B). Apple experienced ongoing issues with iPad supply.
Overall gross margin: 43.3% (vs. my 43.3%)
Services gross margin: 71.5% (vs. my 72.0%)
Products (HW) gross margin: 34.5% (vs. my 34.5%)

Breaking down the $2.9B revenue miss to my estimate, there were two primary drivers:

$1.5B revenue miss due to Mac supply not being as good as thought.
$1.3B revenue miss due to weaker Wearables, Home, and Accessories.

Even though Apple missed my (elevated) expectations, the company reported a 3Q22 beat to consensus as revenue came in about $2B stronger than sell-side analysts were expecting. The beat was due to stronger iPhone revenue as most analysts were expecting something more like $36B to $38B of iPhone revenue (vs. the $40.7B reported figure). EPS came in $0.04 above consensus as Apple’s margins came in slightly better than consensus thought as well.

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The full article includes the following sections:

Apple’s 3Q22: The Key Numbers
iPhone Sales Resiliency
Apple Ecosystem Growth Slows
Reading Between the Lines of Apple’s 3Q22 Earnings Q&A With Analysts
Notes From Apple’s 3Q22 10-Q
Tracking Apple’s Paid Subscriptions
Apple's Share Buyback Update
My Revised Apple Financial Estimates

An audio version of the article is available to members who have the podcast add-on attached to their membership. More information about the add-on is found here.

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