Apple Q4 Results Expected to Lean on Services Gains

iPhone maker's Q4 EPS, sales growth likely slowed

Key Takeaways

  • Apple's Q4 earnings per share (EPS) is estimated by analysts to reach $1.27 vs. $1.24 in Q4 FY 2021.
  • Apple's Q4 services revenue is expected to rise nearly 10% year-over-year, topping $20 billion.
  • Revenue for Q4 at Apple is projected to grow 6.3% from the year-ago quarter to $88.6 billion.

Apple Inc. (AAPL) heads into the final quarterly report of its fiscal year after market close on Oct. 27, 2022, as the most valuable company in the world, after briefly losing the crown to Saudi Aramco earlier this year. The maker of iPhones and MacBook laptops is expected to maintain its business momentum with year-over-year EPS growth of 2.4% to $1.27 and a 6.3% revenue gain, despite tough comparisons with the record-breaking Q4 of a year earlier.

Apple reportedly scrapped efforts to increase output of the basic new iPhone 14 model earlier this fall after initial sales disappointed. While higher-end handsets have sold better, concerns about lackluster overseas demand raise the stakes for the company's outlook for Q1 FY 2023, which includes the crucial holiday season.

The market is also focused on the outlook for Apple's services revenue, prized because it tends to be less volatile and more profitable than hardware sales. Services revenue has outpaced growth overall for the last three quarters, and that trend is expected to continue in Q4 with a 9.6% services revenue gain year-over-year, based on analysts' average estimate. Services revenue will get a boost from the price increases Oct. 24 on subscriptions to Apple Music, Apple TV+, and the Apple One digital bundle.

Apple's stock is down about 14% in 2022, but that's better than the 19% decline year-to-date for the S&P 500 index (see related chart below). Apple has also outperformed the other technology megacaps this year.

One-Year Total Return for S&P 500 and Apple


Apple Earnings History

If Apple's Q4 2022 results meet analysts' consensus estimates, annual EPS will have nearly doubled in two years, while revenue will have grown 43% over the same span, according to Visible Alpha.

Apple has not reported quarterly EPS below the consensus estimate since early 2016, when it missed by a penny. On two other occasions since it has matched analysts' expectations.

Apple's Q3 FY 2022 EPS topped analysts' consensus estimate by 3.4%, and the stock rose 3.3% the next day. EPS for Q2 FY 2022 surpassed market expectations by 6.3%, but the stock fell 3.7% the following session after CEO Tim Cook said the company was coping with costly supply-chain snags. In Q1 FY 2022, EPS jumped 25% and topped the consensus estimate by 11%. The stock jumped more than 5% the next day.

Apple Key Stats

  Estimate for
Q4 FY 2022
Q4 FY 2021 Q4 FY 2020
Earnings Per Share ($) 1.27 1.24 0.73
Revenue ($B) 88.6 83.4 64.7
Services Revenue ($B) 20.0 18.3 14.5

Source: Visible Alpha

The Key Metric

Apple defines services revenue as "sales from the company’s advertising, AppleCare, cloud, digital content, payment, and other services." Amortization of the deferred value of the services bundled with certain products is also included.

In its Q3 FY 2022 earnings report, Apple said advertising, the App Store, and cloud services have led services growth this year. The company reported a 71.5% gross margin for its services segment in Q3, up from 69.8% a year earlier. By comparison, the company's products generated a gross margin of 34.5% during the last quarter.

Analysts estimate Apple's Q4 FY 2022 services revenue at about $20 billion, up from $18.3 billion in the comparable quarter a year ago.

Article Sources
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