Apple 1Q24 10-Q Takeaways, Apple Balance Sheet Observations
Today’s update will wrap up Neil’s 1Q24 earnings preview. We will examine Apple’s 1Q24 10-Q filing and the latest balance sheet trends. Here’s what we have covered so far on the Apple earnings front:
Feb 2nd: Big picture takeaway, Apple’s 1Q24 numbers (vs. my expectations), 2Q24 guidance.
Feb 5th: Looking through 1Q24 numbers to examine Apple’s ecosystem growth.
Feb 6th: Analyzing Apple’s earnings call with analysts.
Today: Examining the 10-Q and balance sheet developments.
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Apple 1Q23 10-Q Takeaways, Apple's Share Buyback Update, Revisiting Apple’s Cash Neutral Goal (Daily Update)
Hello everyone. Today’s update will conclude our Apple earnings review as we go over Apple’s 1Q23 10-Q and focus on some balance sheet items (share buyback pace and Apple’s cash neutral goal). The plan is to include an updated version of Neil’s Apple earnings model in tomorrow’s update. Let’s jump right in.
Apple 1Q23 10-Q Takeaways
Published at the end of FY1Q, 2Q, and 3Q, 10-Q filings provide additional commentary and disclosures regarding a company's financial results.
The following items from Apple's 1Q23 10-Q jumped out at me. We will discuss Apple’s share buyback shortly.
Product Details. Apple provided additional commentary behind sales trends for its major product categories.
iPhone. Net sales decreased in 1Q23 due “primarily to lower net sales from the Company’s new iPhone models.” The comment is referring to Apple not being able to report iPhone unit sales growth due to iPhone 14 Pro and Pro Max shortages.
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Apple FY3Q22 Earnings Recap
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
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