Apple: Q3 EPS at $1.20, Beats Estimates, Guidance Impacted by Supply Constraints and Currency Issues

Apple (AAPL) announced on Thursday, July 28, its long-awaited financial results, according to which fiscal Q3 revenues missed slightly, but EPS beat estimates. Digital era mogul reported its Q3 of fiscal 2022 diluted earnings per share stood at $1.20, beating consensus estimates. The figure, however, marks an annual fall of 7.7%. The company stated that it lost over 3 percentage points of growth due to currency issues and the Russian business impact.

AAPL’s Q3 revenue hit $83 billion, marking a 2% increase YoY. Services revenue was particularly strong in the third quarter, rising from $17.5 billion last year to $19.6 billion this year. Meanwhile, operating income for the period declined 4% on an annual basis to $23.1 billion and net income dropped 10% to $19.4 billion. iPhone sales were up 2.7% to $40.7 billion. Apple CEO Tim Cook told CNBC the company expects the "revenue to accelerate" in the fourth quarter of this fiscal year "despite seeing some pockets of softness."

The company is struggling with a number of challenges, including rising inflation affecting consumer spending and Covid-19 restrictions in China impacting sales and production in that country. The company's market capitalization has also shrunk due to a major downturn in the high-tech sector, to $2.5 trillion.

While neither Cook nor Apple CFO Luca Maestri gave exact earnings or revenue guidance for the company's fiscal Q4, Maestri said revenue is expected to "accelerate" on a YoY basis. Maestri also said Apple expects its gross profit margins for the quarter to be between 41.5% and 42.5%. Wall Street analysts had previously forecast Apple to earn $1.31 a share, on $90 billion for the quarter that ends in September.

Apple will be launching its new iPhone 14 lineup alongside the Apple Watch Series 8 this fall, and while it won't have much of an impact on the company's Q4 earnings as products are announced just a few weeks before the end of the quarter, it should boost its performance in the quarter. Apple's stock gained 2.42% in the following day’s premarket trade. At its current P/E of slightly over 25X Apple stocks would have been a definite buy in a more favorable market environment.