Slowdown of Apple’s Service Revenue might be a Major Concern in Future Outlook

Apple announced its 2022 Q4 financial results on October 27, 2022. According to the announcement, total net sales, operating income and net income were up 8%, 5% and 1%, respectively (YoY, 3 months). In addition, cash generated by operating activities was up 17% (12 months, TTM, YoY). Moreover, free cash flow was up 12%.

Looking at sales for 12 months, product sales were up 6% (12 months, TTM, YoY). In addition, service revenues were up 14%. However, in 2022 Q4, product sales and service revenue were up 9% and 5%, respectively (3 months, YoY). These figures might be interpreted as signs of slowdown in service revenue growth.

As for sales by products, Mac showed the strongest growth of up 25% (3 months, YoY). It was followed by iPhone and Wearable, Home and Accessories. However, iPad continued to show a decline of as much as -13%.

Mac and Macbook are placed on a wooden desk.
Photo by Sora Sagano on Unsplash

Reviewing sales by region, Asia-Pacific, other than Japan and Greater China, showed the strongest growth of up 23% (3 months, YoY). It was followed by Europe of up 10%. Sales in Japan continued to decline, down 5%.

The slowdown in Apple’s revenues growth in its services segment might be a major concern for Apple’s future performance. In this era of 5G communications, IT companies are shifting their businesses from product-based to cloud-based.  Improved earnings in the service segment would contribute to Apple’s growth from medium to long term perspective. 

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