29 days ago • 2 mins
What’s going on here?
Apple’s sales and profit surpassed Wall Street’s expectations, but the tech icon’s hardware business left a lot to be desired.
What does this mean?
Apple might’ve delivered better-than-expected sales and profit – but dig a little deeper, and there’s more to the story. Apple’s profitable service business led by example, making 16% more revenue in the third quarter than the same time last year, thanks to hardy App Store spending, revamped iCloud plans, and a steady flow of AppleTV+ subscriptions. That helped pull up profit margins, sure, but then hardware soured the story. Double-digit declines were already predicted for Mac sales because of tough competition, but reported sales for the quarter still managed to disappoint, falling over a third from the same time last year.
Why should I care?
For markets: China’s trying out minimalism.
Apple’s been banking on the iPhone 15 to give the hardware department a lift. And while the firm’s initial comments seemed to suggest that the newest model was doing better than the iPhone 14 did at the same time last year, that’s only based on the first week of sales. The following weeks and months might not be as kind: competition’s tough in China, with local competitors like Huawei doing their best to win budget-conscious shoppers’ hard-earned cash. So if Apple wants to really invigorate its hardware business, the recent release of new M3 chips will have to be something really special.
The bigger picture: Thanks, banks.
The Federal Reserve’s recent decision to pause interest rate hikes is a welcome relief for stocks, especially tech ones. Higher interest rates dent the present value of their future cash flows, which is what investors use to value stocks. Plus, lower interest rates relative to other major economies will weaken the dollar, which makes US products and services cheaper for foreign customers. That’s a win for tech companies that make a lot of their money internationally – we’re looking at you, Apple.
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