Originally published at: Apple Q3 2023 Earnings Down 1% on Exchange Rates - TidBITS
Citing “foreign exchange headwinds” and “difficult compares” for its Mac and iPad results from the year-ago quarter, Apple reported a total revenue decline of about 1%. On the other hand, Services revenues continued to expand, and product sales to emerging markets were up. In short, Cupertino isn’t worried.
The quarter’s results were actually pretty good, all things considered. In particular profit is up, expenses are down. Subscriptions are up, and Services did particularly well. But the prognosis Luca gave for next quarter was not all that encouraging, basically flat. Arguably a good long-term buying opportunity…
But next quarter does not include iPhone 15 sales (it’s expected to go on sales in late September), so I don’t see the problem. I would expect iPhone sales to soften just before the launch of a new model, so flat is actually quite good.
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Q4 usually shows an increase over Q3. So being ‘flat’ would mean Q4 would have a larger decline over last year’s Q4 (which went from $83b to $90b.)
Yeah, that’s why we always make a point of comparing year-ago quarters. The iPhone always comes out in September, so it makes something of a bump in Q4 but then really hits in Q1.
The issues with Q4 seem to revolve around Q4 2022 being artificially high as Apple was able to sell more Macs (and iPads) because pandemic-related factory shutdowns prevented sales in Q3 2022. So it’s going to compare Q4 2023.
The financial aspects of running a company as large as Apple are truly mind-bending. Cook and Maestri do a good job of making it seem fairly understandable on the calls, but the details must be insane to get to that point.
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Nonetheless, CEO Tim Cook admitted that increasing iPhone sales, particularly in the Americas, was “challenging.”
Definitely, in light of increasing iPhone ASP that will be difficult in such a mature market.
But the way I’m interpreting their comments yesterday, they don’t care about moving fewer units as long as they make more profit.
With gross margins for its Services offerings (70.5%) double those that Apple achieves with its hardware products (35.4%), revenue increases in this sales category are particularly rewarding for the bottom line.
Is this a particularly polite way of saying what they charge for iCloud storage is inflated? 
Finally, I will say that I feel a bit bad for the Mac side of business. IMHO Mac hardware has rarely been in such good shape as it is right now, yet the numbers don’t really reflect that. The economic environment is certainly tricky. I just hope it’s really only that.
I don’t understand this sentence: “ … revenues were down 1% … that hurt revenues by 4% ….”
Revenues were either down 1% or 4%, but not both.
Are you saying that a 4% decline in revenue due to lower foreign exchange rates was partially offset by a 3% favorable change in something else? What?
Sorry if I’m misreading a word somewhere.
I think that it’s just pointing out that iCloud involves a huge fixed cost and that there is very little addional cost related to incremental sales.
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The 4% is due to foreign exchange rates fluctuation:
“ Although the company’s revenues were down by 1% compared to the year-ago quarter, largely due to foreign exchange rates that hurt revenues by nearly 4%”
The services topping a billion subscribers is positive news. More and more of Apple’s revenue - and proportionally profit - will be coming from services. I’m sure at some stage they’ll be expanding them as well. I still want them to have a full service, multi platform Health app. It annoys me I don’t get a nice, clear dashboard which I could print from my Mac and hand to my doctor.
I was surprised by the size of the share price drop on Friday. I took the opportunity to buy a little more AAPL as I’m looking for a long term investment with no real intent to ever sell. I’ll be happy for my wife and kids to have them when I’m gone. I’ve already told my kids not to sell 
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Yes.
The wording in most of the news reports is a little ambiguous, but Apple’s actual remarks from the earnings call were clearer.
Using the international currency exchange rates in effect when the Q3 2023 report was compiled, Apple’s total global revenue measured in US dollars appeared approximately 4% lower than if the same calculation was made using the exchange rates that were in effect a year ago.
For example, if you bought something from Apple that cost €100 in Paris last year on July 28, 2022, it would have been recorded as $97.78 of revenue in the US. If you bought something for €100 last week on July 28, 2023, it would have been recorded as $90.76 of revenue, roughly 7% lower.
Around 60% of Apple’s revenue comes from outside the US, so without looking up any numbers, if we make the very rough assumption that exchange rates with most other currencies have behaved like the Euro and declined around 7% vs the US dollar over the last year, a 4% decline in total revenue when calculated in dollars sounds about right.
If today’s exchange rates were what they were last year, Apple actually would have shown an increase in global earnings.
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@josehill has nailed it.
Apple’s actual wording was:
We continue to face an uneven macroeconomic environment, including nearly four percentage points of foreign exchange headwinds. On a constant currency basis, we grew compared to the prior year’s quarter in aggregate and in the majority of markets we track.
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IPad sales may be down because they have become EXPENSIVE! Apple dropped the 128gig, so choices are only 64 or 256 (is that correct?) And the larger memory contributes to the price.
I have 64 gig Version 5 iPad Air. I have been looking for a used 5 or 6 version mini iPad. They’ve aren’t cheap, either!
The iPad isn’t a great example of this, given that the 9th-generation iPad with 64 GB is still $329, which is insanely cheap. Yes, the next storage bump is 256 GB, which adds $150, but if you’re not doing content creation, you can probably get away with 64 GB.
The range is great, though, with the 12.9-inch iPad Pro starting at $1099.
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I agree with you, @ace, about the $329 iPad being a good deal. But I would claim it’s the exception that proves the rule. The other iPads are not truly great value. And even if they’re not outright ripoffs, they are expensive. More so that say a MBA I would claim.
@ace, you are right about this particular iPad. But I go for the iPad Air. And they are expensive. My iPad Air 2 is old, but going strong, However, it can’t be updated to IOS16.
The question is why you’re restricting yourself to the iPad Air. The $329 9th-generation iPad is vastly more powerful than your iPad Air 2, for instance, so if the iPad Air 2 is mostly meeting your needs now, there’s really no reason to upgrade to an M1-based fifth-generation iPad Air.
I run into this sort of thing too, since I consider myself a power user. But the fact is that Apple’s low-end devices have so much more power than they used to that I don’t need to buy the high-end pro models anymore. That’s why I stick with the 13-inch MacBook Air. Similarly, when Tonya upgraded from her 2014 27-inch iMac, she was able to go with a relatively low-end M2 Mac mini which is much further down in the lineup than her iMac had been when it was new.
I have no need for an iPad other than testing and basic familiarity, so the only reason I’d buy a higher-end one than the base unit is if I felt I needed the extra features to be able to write about them.
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Ace, the iPad Air 2 can’t be updated to IOS 16, but I use it anyway. I also have an iPad Air 5 (latest version) that was given to me as a gift! I use this iPad more then the Air 2.
I have discovered that I LIKE having 2 iPads! I can be reading my email on 1 iPad and answering Messages, watching YouTube, ordering from Amazon, banking, etc… on the other one at the same time. 
I think I am in a different league than other Tidbiters that I don’t need to work as hard as they do.
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