Reading Between the Lines of Apple’s 1Q23 Earnings Q&A With Analysts (Daily Update)

Hello everyone. Welcome to a new week.

Last Friday, we went over the numbers from Apple’s 1Q23 earnings release. We also looked at two of the major themes from earnings: the significant FX impact on Apple’s results and changing device upgrading trends.

In today’s update, we will focus on Apple’s 1Q23 earnings Q&A session with analysts. Instead of just recapping the question and answer exchanges that occurred on Apple’s call, we will go over Neil’s thoughts / response to each exchange. This will allow Neil to go beyond what was talked about on the call. Let’s jump right in.

Reading Between the Lines of Apple’s 1Q23 Earnings Q&A With Analysts

NOTE: The following earnings call questions (“Q”) and answers (“Cook” or “Luca”) have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, The Motley Fool offers a written transcript here.

Supply Chain

Q: What is the state of Apple’s supply chain? Do you expect to increase inventory levels to insulate from supply disruptions?

Cook: Production is now back to “what we need it to be.” We continue to optimize our supply chain. We now have final assembly for iPhone in three countries. Given all that has happened over the past three years, our supply chain has proven to be resilient.

My response: Apple received a variation

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Apple 1Q23: By the Numbers, The FX Factor, My Apple Earnings Theory (Daily Update)

Hello everyone. Today's special Friday edition of the Daily Update will be focused on reviewing Apple's earnings. The idea is to keep things broad and look at the big picture. We also examine how Apple’s results compared to Neil’s expectations. The earnings discussion will continue next week. Let's jump right in.

Apple 1Q23: By the Numbers

We knew 1Q23 was going to be a noisy quarter for Apple. Along those lines, we didn’t get too many surprises. Results were all over the place. iPhone results missed my estimate by $5.0B while iPad beat by $1.5B.

Heading into earnings, the questions were found with Apple’s 2Q23 guidance. This is where management commentary

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Setting the Stage for Apple 1Q23 Earnings, About AAPL’s Move Higher, Looking Ahead at Apple’s 2Q23 (Daily Update)

Hello everyone. Welcome to a new week.

Apple reports FY1Q23 earnings (results from October to December) on Thursday. We kick off today’s update with Neil’s thoughts and expectations heading into Apple’s earnings. The discussion goes over implications found with AAPL’s recent outperformance to the market. The update concludes with some of Neil’s early thoughts regarding how Apple’s 2Q23 (January to March) is trending.

We will go over Neil’s granular Apple financial estimates tomorrow. His revised Apple earnings model will also be ready.

Let’s jump into today’s update.

Setting the Stage for Apple 1Q23 Earnings

Heading into Apple’s earnings release on Thursday, expectations for what Apple will announce remain muted. Even though Apple shares are up 10% so far in 2023, the move doesn’t necessarily correspond with consensus believing Apple’s results and guidance will surprise to the upside. More on that shortly.

Low or muted expectations for Apple’s results may come as somewhat of a surprise. The company’s 4Q22 results were decent. Here was a very quick summary:

“Despite facing major FX headwinds, Apple’s ecosystem remained on track in 4Q22. The company reported all-around solid 4Q22 results. The few areas of weakness (iPad and Services came in below my expectations) were offset by iPhone, Mac, and Apple Watch sales strength.”

While 1Q23 guidance was a tad weak with revenue growth coming in about 200 basis points lower versus my (adjusted) expectations – check out our 4Q22 earnings review here for the details as to how that number was derived - Tim Cook and CFO Luca Maestri sounded

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Inside Apple’s Record Mac Quarter, What’s Going On With iPad Sales?, Charting Apple’s Ecosystem Growth (Daily Update)

In today's update, we will continue our Apple 4Q22 earnings review with a few granular takeaways. In particular, we look beyond the Mac and iPad numbers. Tomorrow, our focus will be geared toward everything that was discussed on management's earnings call.

Inside Apple’s Record Mac Quarter

Apple reported $11.5B of Mac revenue in 4Q22. It was a quarterly record that exceeded my estimate by a significant $1.5B. Prior to 4Q22, the previous Mac revenue record was $10.9B (in 1Q22).

Diving deeper into 4Q22 Mac results, things become more complicated. We may be seeing something equivalent to a near-term plateau, or growth air pocket, for Mac sales.

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