Apple Inc. (NASDAQ: AAPL) announced its financial results for the second quarter of fiscal 2023 ended April 1, 2023. Despite the continuous obstacles, such as the challenging macroeconomic environment, impending recession, and rising inflation around the world, the March quarter result exceeded the expectations of both industry analysts and the company. Apple revenue in FY Q2 2023 declined just 2.5% YoY to $94.8 billion. Interestingly, this is the second-highest Q2 revenue the company has ever generated. The company’s net profit also declined 3.4% YoY to $24.2 billion.
It is worth highlighting that the decline in Apple’s global revenue in Q2 FY23 was primarily due to a drop in its products’ revenues (including Mac, iPad, and Wearables, Home and Accessories). Apple’s global revenue from products fell a notable 4.6% YoY in fiscal Q2 2023, amounting to $73.9 billion. However, the moderate sales of the iPhone 14 series during the March quarter helped to offset this decline.
In comparison, Apple’s global revenue from services reached an all-time high of $20.9 billion, up 5.5% YoY during the second quarter of fiscal 2023.
Apple losing big time in products sales
Apple’s revenue from iPhone increased a meagre 1.5% YoY in FY Q2 2023 to $51.3 billion worldwide. However, this is the highest-ever revenue the company generated from the sales of iPhone in the second fiscal quarter. The minuscule 2% growth in iPhone revenue could be attributed to the strong performance of the iPhone 14 series in emerging markets, including South Asia, India, Latin America, and the Middle East, during the March quarter.
Apple continues to generate a significant portion of its total global revenue from the sales of iPhones, accounting for 54.1% of its revenue in FY Q2 2023. This demonstrates how reliant the company is on the iPhone product line and emphasises how crucial smartphone market success is to maintain its position as the most valuable tech company in the world.
However, Apple has also been working to diversify its revenue streams in recent years, primarily through expanding its services division, which has shown promising growth in recent quarters.
The company’s services division, which includes offerings like the App Store, Apple Music, and iCloud, has become a significant contributor to Apple’s overall revenue. Interestingly, Apple’s services business accounted for over 22% of the total global revenue in FYQ2 2023, due primarily to higher net sales from cloud services, music and advertising. In just five years, Apple’s quarterly revenue from services has doubled.
The low sales of Mac products caught everyone off guard the most. Apple’s global revenue from Mac plummeted dramatically by 31.3% YoY, from $10.4 billion in FY Q2 2022 to just $7.2 billion in FY Q2 2023. This can be understood by the fact that global shipments of traditional PCs fell 29% YoY during the March quarter of 2023.
The high pricing of the MacBook Pro series, the emergence of big-screen tablets and the low demand resulting from economic issues and recession may also have contributed to the poor sales. In FY Q2 2023, Mac products accounted for only 7.6% of Apple’s total revenue.
Apple iPad revenue also plunged 12.8% YoY in FYQ2 2023 to just $6.7 billion worldwide.
“Our year-over-year business performance improved compared to the December quarter, and we generated strong operating cash flow of $28.6 billion while returning over $23 billion to shareholders during the quarter,” said Luca Maestri, Apple’s CFO.
Apple’s big bet on India paying off well
India is the hottest market for all global companies, particularly smartphone companies. Probably that’s the reason big giants such as Apple, Samsung, Oppo, Vivo, etc., are betting big on India’s smartphone market to gain a sizable share.
Interestingly, during Apple’s earnings call, India was mentioned 19 times, highlighting the country’s status as one of the key focus areas.
Apple witnessed a strong performance in India during fiscal Q2 2023, which CEO Tim Cook described as “an incredibly exciting market” and a “major focus” for the tech giant. He also reported that Apple achieved double-digit year-over-year quarterly growth, indicating a robust performance in the country.
According to another report from Counterpoint Research, Apple iPhone shipments in India skyrocketed in the first quarter of 2023 (FY Q2 2023), which helped the company secure a 6% share of India’s smartphone market. This shipment growth can be attributed to Apple’s strong brand appeal, expanding retail network, and attractive financing options, among other factors.
Although India is one of the largest and fastest-growing markets for Apple, the country still lags behind the US and Europe in terms of revenue generation. India is known for its price-sensitive nature, as most consumers search for discounts and coupons before making a purchase. As a result, Apple generates a low average revenue per user (ARPU) in India for products such as TV, movie, and music streaming in comparison to other regions.
Tim Cook’s long-term strategy for Apple in India will undoubtedly make it the most lucrative market for the company. This is further supported by the Production-Linked Incentive (PLI) scheme, which has facilitated a significant boost in Apple’s manufacturing capabilities in India. As a result, it is anticipated that Apple will manufacture iPhones worth Rs 47,000 crore in India during FY23, which is nearly five times higher than the previous year.