Apple’s Mac and wearables revenue stumbles as tech sector recedes

After a strong quarter earlier this year, Apple is continuing to break records. According to the company’s financial results posted today, it’s reporting a revenue record of $83 billion, an increase of 2 percent from the same period last year. Apple also said it reached an all-time high for its installed base of active devices “in every geographic segment and product category.” However, the company’s profits are down by a whole 11 percent, and while it continued to see growth in its iPhone sales, revenue from Macs and wearables dropped.

It’s worth noting that Apple’s recently announced MacBook Air with M2 chip only started shipping this month, so the numbers for Macs are likely to increase next quarter. Considering the devices the company is expected to launch in the fall, it’s also possible consumers are holding out for new products and waiting out the ongoing inflation. 

Apple CEO Tim Cook said in a press release “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.” The company’s CFO Luca Maestri added “Our June quarter results continued to demonstrate our ability to manage our business effectively despite the challenging operating environment.”

During the company’s earnings call, Cook said that iPhone set a “June quarter record for both revenue and switchers to iPhone.” Sales of iPhones indeed grew from $39.6 billion to $40.7 billion year over year. In response to a question about inflation affecting consumer demand, Cook said that while the macroeconomic environment had no obvious impact on iPhones, “Mac and iPad were so gated by supply that we didn’t have enough product to test the demand.” For the wearables, home and accessories categories, though, “we did some impact there that we would attribute to the macroeconomic environment,” he said.

Cook also talked about how the company was able to welcome developers to Apple Park at WWDC this year, calling it “a reminder of the economic miracle the App Store represents.” 

He added that “the iOS app economy supports more than 2.2 million jobs here in the United States and many more around the world.” Apple prevented “nearly 1.5 billion dollars in fraudulent transactions,” Cook said, and stopped “over 1.6 million risky and vulnerable apps and app updates.” 

Maestri said Macs generated $7.4 billion in revenue “despite supply constraints.” The iPad install base reached a new all-time high this quarter, with more than half of subscribers being new users in this time. Meanwhile, revenue from wearables was $8.1 billion, which is down 8 percent from the same period last year “as we faced foreign exchange headwinds, different launch timing for home and accessories products and supply constraints, as well as the overall macro economic environment,” Maestri said. 

Still, the company hit a new all-time record of “installed base of devices in the category.” Over two thirds of people who bought an Apple Watch during the quarter was new to the company, Maestri noted. Apple also saw strong performance in its paid subscription products, with more than 860 million paid subscriptions across the services it offers. 

Samsung posts 12 percent increase in profit but warns of weak mobile and PC demand

For the second quarter of 2022, Samsung has reported a consolidated revenue of KRW 77.2 trillion (US$59.4 billion), which is a record high for the quarter ending on June 30th. Samsung’s operating profit also reached KRW 14.1 trillion (US$10.8 billion) — that’s 12 percent higher from the same period a year earlier and is its best yet since 2018. As has been the case these past years, the company’s semiconductor or Device Solutions (DS) division greatly contributed to those numbers and has achieved a historical high in quarterly revenue for the second consecutive quarter.

The DS division posted KRW 28.5 trillion (US$21.9 billion) in consolidated revenue and KRW 9.98 trillion (US$7.7 billion) in operating profit in the second quarter, thanks mostly to server chip demand. However, chip demand for consumer products, such as mobile phones and PCs, was much weaker than expected “due to widening impacts of macro issues.” In fact, Samsung said its DRAM and NAND shipments came in below guidance. The company also expects demand for consumer devices to stay weak and even believes that there’s a possibility for this slump in demand to make its way to enterprise.

As you can guess based on that information, Samsung’s Mobile eXperience (MX) business was also affected by the overall decline in market demand. The company blamed “geopolitical issues and concerns over inflation on top of continued weak seasonality” for the mobile division’s decline in earnings. It also said the costs of components and logistics affected the business’ profitability and caused it to slide lower than the previous quarter’s.

The tech giant doesn’t expect smartphone sales to blow up next quarter either: Demand for new phones will likely stay similar year-on-year or show only a single-digital growth, it predicts, because of prolonged geopolitical issues and economic uncertainties. That said, it’s hoping that the launch of new foldables could pad its sales numbers in the coming months. Samsung will unveil its next-gen foldable phones at its upcoming Unpacked event on August 10th. 

Meta’s revenue shrank for the first time in its history

Facebook parent company Meta has just reported its earnings for the second quarter of 2022, and it was another quarter of shrinking profits. Total revenue of $28.8 billion was only down one percent compared to Q2 one year ago, but net income dropped 36 percent to $6.7 billion. Making almost $7 billion in profit is not a bad quarter for anyone, but the size of the decline compared to a year ago is pretty significant. And, according to the Wall Street Journal, this is the first-ever drop in revenue for Meta / Facebook — so even though we’re only talking one percent, it’s still noteworthy.

Revenue from advertising and Meta’s “family of apps” was essentially flat year-over-year, and Reality Labs (home to hardware like the Meta Quest and other metaverse-related initiatives) actually grew 48 percent year-over-year to $452 million. But Reality Labs accounted for a $2.8 billion loss this quarter, a 15 percent larger loss than Q2 one year ago. At this rate, it seems likely that Reality Labs will lose Meta more than the $10 billion it cost the company in 2021. Indeed, the company said it expects Reality Labs revenue to be lower in the third quarter.

This comes the same day that the FTC announced it was seeking to block Meta’s acquisition of Supernatural VR workout app maker Within, a proposed sale that was announced last year. “Instead of competing on the merits, Meta is trying to buy its way to the top,” John Newman, deputy director of the FTC’s Bureau of Competition, said in a statement.

In June, Meta said that it had 2.88 billion daily active users in its family of apps (which includes Facebook, Instagram, WhatsApp and Messenger) and 3.65 billion monthly active users, both of which are up four percent compared to a year ago. Facebook-specific growth was smaller, though — average daily and monthly users only increased three percent and one percent, respectively. 

Buried in today’s press release is a somewhat unusual leadership change announcement as well. As of November 1st, the company will welcome its first Chief Strategy Officer, David Wehner, who is currently Meta’s Chief Financial Officer. VP of Finance Susan Li will be promoted to the CFO position when this change goes into effect. As CSO, Wehner will “oversee the company’s strategy and corporate development,” a presumably broader scope of responsibilities compared to his current role.

On today’s call with investors, CEO Mark Zuckerberg said that about 15 percent of the content that people see on Facebook and Instagram are AI-driven “recommendation” posts, and he said that he expects that to double over the next year. So if you’re already frustrated by the drastic changes that Meta is making to Facebook and Instagram, things aren’t going to go backwards any time soon. 

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