Apple reports 10.6% drop in third-quarter net profit despite record June sales

The Cupertino company’s net profit in the period to June 25 dipped to more than $19.4bn

Apple's revenue surged 1.6 per cent on an annual basis to nearly $83 billion during the June quarter. Bloomberg

Apple’s net profit dropped almost 10.6 per cent on an annual basis in its fiscal 2022 third quarter, despite the company earning record revenue.

The Cupertino company’s net profit in the period that ended on June 25 dipped to more than $19.4 billion, almost $5.6bn less than the quarter that ended on March 26.

Revenue surged 1.8 per cent on an annual basis to nearly $83bn during the quarter, exceeding analysts’ estimates of $82.8bn.

This was a record for June quarter sales for the iPhone maker but still $14.3bn less than the March quarter.

In April, Apple warned that parts shortages would hit its sales by between $4bn and $8bn.

Tim Cook, chief executive of Apple. AFP

“This quarter’s record results speak to Apple’s constant efforts to innovate, to advance new possibilities and to enrich the lives of our customers,” chief executive Tim Cook said.

“As always, we are leading with our values and expressing them in everything we build, from new features that are designed to protect user privacy and security, to tools that will enhance accessibility, part of our longstanding commitment to create products for everyone,” Mr Cook said.

The company’s diluted earnings per share dropped nearly 8 per cent year on year to $1.20, exceeding the estimates of $1.16.

The company’s stock, which has dropped more than 13.5 per cent since the start of the year, was trading almost 4 per cent up at $163.60 a share in after-market hours.

iPhone sales account for about 49 per cent of the company's revenue.

Smartphone sales surged nearly 2.8 per cent to more than $40.6bn in the quarter from the year-earlier period, exceeding analyst estimates of $38.3bn.

The company’s total revenue from its services division grew about 12.1 per cent annually to $19.6bn, while revenue from wearables, home and accessories products decreased almost 7.9 per cent yearly to more than $8bn.

Revenue from iPads and computers dropped 6.3 per cent to $14.6bn.

Apple’s sales in the Americas region accounted for more than 45 per cent of the company's total third-quarter revenue, with $37.5bn .

It was followed by Europe and the Greater China market (China, Hong Kong and Taiwan), which added $19.3bn and $14.6bn to the company’s revenue.

Japan and rest of the Asia Pacific market added $11.6bn to Apple’s third-quarter sales, an annual drop of 2.2 per cent.

A welcome sign at the entry to Apple's headquarters in Cupertino, California, before the keynote presentation at the company's conference. AP

Tim Cook, chief executive of Apple, is displayed on a screen speaking during the Apple Worldwide Developers Conference. Bloomberg

Mr Cook speaks on stage. AFP

Craig Federighi, Apple's senior vice president for software engineering, speaks during the keynote presentation at the conference. AP

Apple's Katie Skinner shows Safety Check in iOS 16 as the company's WWDC22 begins. Photo: Apple

Mr Federighi talks about new software features in iOS 16. Photo: Apple

Mr Federighi introduces iOS 16's reimagined lock screen. Photo: Apple

Corey Fugman, senior director of merchant solutions at Apple Pay, introduces new features. Photo: Apple

Vice president of health, Sumbul Ahmad Desai, talks about new Health features coming to iPhone and Apple Watch. Photo: Apple

Apple's Corey Wang talks about the redesigned Home app in the keynote video. Photo: Apple

Apple's Kristin White unveils the new MacBook Air. Photo: Apple

A new MacBook Air running an M2 chip is displayed during Apple's annual World Wide Developers Conference. Reuters

Apple generated $23bn of operating cash flow and returned more than $28bn to its shareholders during the quarter.

“Our June quarter results continued to demonstrate our ability to manage our business effectively despite the challenging operating environment,” said Luca Maestri, Apple’s chief financial officer.

“We set a June quarter revenue record and our installed base of active devices reached an all-time high in every geographic segment and product category."

Apple did not issue official guidance about future revenue and profits. The company stopped offering guidance at the start of the Covid-19 pandemic because of uncertainty in business.

“In terms of an outlook in the aggregate, we expect revenue to accelerate in the September quarter despite seeing some pockets of softness,” Mr Cook told CNBC.

Apple is expected to launch its iPhone 14 series smartphones in September. AFP

“We do see inflation in our cost structure … we see it in things like logistics and wages and certain silicon components, and we are still hiring but we are doing it on a deliberate basis."

Apple said its board of directors had declared a cash dividend, payable on August 11, of $0.23 for each share of the company’s common stock.

The company is also expected to launch its iPhone 14 series smartphones and new variants of Apple Watch in coming months.