Apple's Q1 FY'23 results missed estimates, with revenue declining by 5.5% versus last year to $117.1 billion and earnings coming in at $1.89, down from $2.11 in the year-ago period. While Apple was weighed down by supply chain issues for its flagship iPhone 14 Pro devices (iPhone sales were down 8% versus last year), macro headwinds are also impacting sales of the company's Macs and digital services. However, the iPad proved a bright spot within Apple's hardware lineup, with sales growing by roughly 30% year-over-year.
Note: Apple's FY'22 ended on September 24, 2022. Q1 FY'23 ended on December 31, 2022
Apple unveiled its new iPhone 14 models in September 2022 - including the iPhone 14, iPhone 14 Plus, iPhone 14 Pro, and iPhone 14 Pro Max. While the standard iPhone 14 models feature relatively incremental updates versus the iPhone 13, the pricier Pro models have seen more substantial updates, including always-on displays and a re-designed notch for the front-facing camera. It's likely that wireless carriers – who've spent considerable amounts on 5G network upgrades – will be aggressive with promotions on the new devices as they look to sign up new customers and boost revenues.
Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:
For additional details, select a driver above, or a division from the interactive Trefis split for Apple at the top of the page.
Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide. Apple's well-known consumer products include the iPhone, Mac, iPad, and Apple Watch. In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music, and iCloud.
We believe the iPhone segment is more valuable than the Mac and iPad segments due to the following:
The smartphone market is significantly larger than the tablet market, and margins in the smartphone business are also likely to be higher. About 1.4 billion smartphones were shipped globally in 2021.
Apple's Mac computers have gained market share due to their superior product differentiation, proprietary Mac OS software and applications, new M-Series processors, and premium build quality. Apple has also been benefiting from the fact that it plays in the high end of the PC market – typically focusing on the lucrative $1,000+ price points – rather than the commoditized low and mid-range where a bulk of the volumes come from. Over FY'22, Mac Revenues reached an all-time high of $40 billion.
Apple's Services business has grown by over 21% between FY'17 and FY'22, eclipsing the iPad and Mac to become the company's second-largest business segment with revenues of about $78 billion in FY'22. While the App store remains the primary driver of growth, services such as Apple Music and Apple TV+ are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with over 900 million active subscriptions at the end of September 2022.
