Apple was the only large tech company to beat Wall Street forecasts for the third quarter, posting top-line growth of 8% for the September quarter to reach $90.15 billion.
That said, Apple’s Services business unit, which encompasses the App Store and subscription services like Apple TV+ and Apple Music, generated revenue of $19.19 billion in the period, also a September-quarter record but up just 5% year over year. That’s compared with 26% growth in the year-earlier period. It’s also down $416 million sequentially from the June 2022 quarter, and off the Services group’srecord$19.8 billion in the first three months of the year.
Digital advertising and gaming were two areas where Apple is “seeing some softness” in its Services unit, CFO Luca Maestri said on the earnings call. Excluding the effect of foreign exchange rates, he said, Services revenue would have seen double-digit year-over-year growth.
Looking to boost subscription revenue, Apple this week introduced its first price hikes for Apple TV+, which is going from $4.99 to $6.99/month in the U.S., and Apple Music, which is bumping up from $9.99 to $10.99/month for the individual plan.
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Overall, Apple reported sales of $90.15 billion — a record for a September quarter for the company — and net income of $20.7 billion, or $1.29 per share, for the three months ended Sept. 24. Analysts expected total revenue of $88.9 billion and earnings per share of $1.27, per Refinitiv.
For the last three months of 2022, the important holiday shopping season, Apple expects overall year-over-year revenue growth to be below the 8% in the most recent quarter, Maestri said. Otherwise, the company did not provide financial guidance.
Apple reported iPhone sales of $42.6 billion for the September quarter, up 9.7% year over year, representing 47% of total revenue. The company’s next-generation iPhone 14 began shipping in mid-September, just a little over a week before the end of its fiscal fourth quarter.
On the earnings call, CEO Tim Cook said the company now has more than 900 million paid subscribers for digital services, up from 860 million the prior quarter. That number includes both Apple-branded offerings (like Apple Music and Apple TV+) and services via third-party apps.
In his prepared remarks, Cook touted Apple TV+’s recent awards wins, including the second straight Emmy for “Ted Lasso” in the comedy series category. He also called out the next-generation Apple TV 4K streaming box, which ships next week at a lower entry-level price of $129.
“This quarter’s results reflect Apple’s commitment to our customers, to the pursuit of innovation, and to leaving the world better than we found it,” Cook said in a statement. “As we head into the holiday season with our most powerful lineup ever, we are leading with our values in every action we take and every decision we make.”
