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Apple turns healthy profit despite weak iPad sales

REUTERS/Andrew Kelly

Apple seems to be weathering the financial storm, albeit with a few hitches. The company reported a record high revenue of $90.1 billion in its fiscal fourth quarter, with a net profit of $20.7 billion. While those were only slight increases versus the same period last year (revenue was up 'just' 8 percent), they came despite a rough economic climate and near-flat revenue growth in the previous quarter.

The issues mainly stem from mixed performance across Apple's lineup. It won't surprise you to hear that the iPhone 14 debut helped fuel the company's mobile revenue ($42.6 billion versus last summer's $38.9 billion), but other segments were volatile. While the MacBook Air M2 helped Mac revenue jump 25 percent to $11.5 billion, iPad sales dropped sharply — they fell to just under $7.2 billion versus nearly $8.3 billion a year earlier. And while services like Apple Music and TV+ set a new record of $19.2 billion, that's only a mediocre bump versus the $18.3 billion from a year ago. Sales for the Apple Watch and smart home devices grew solidly from $8.8 billion to $9.7 billion.

The customer base appears to be strong, at least. During Apple's earnings call, CFO Luca Maestri noted that roughly half of Mac and iPad buyers were new to the platform. The company also touted an all-time (but unspecified) high for the number of active devices. CEO Tim Cook added that phone sales were strong despite tight supply constraints for the iPhone 14 Pro and Pro Max.

The fall (Apple's first fiscal quarter of 2023) could be rosier. Apple introduced new iPads in October this year where it released updated models in September last year, so we'd expect a bump in sales for the tablet lineup. Cook added that last year was "unusually strong" thanks to the iPad Pro M1 launch. The iPhone 14 family had also been available for just eight days during the fourth quarter, so overall iPhone sales should improve.

Apple isn't out of trouble yet. It's still hiring more cautiously, and supply issues (including for the Apple Watch Ultra, Cook says) may dog the company for a while. It's also unclear how people will take to devices like the iPhone 14 Plus, which didn't ship until this month. All the same, Apple may be happy. The computer market tanked 19.5 percent during the quarter, according to Gartner estimates, while Canalys believes smartphone shipments dropped 9 percent. If those figures are reasonably accurate, Apple is thriving simply by avoiding sharp declines in most categories.