Apple Profit Falls About 11%, but iPhone Sales Remain Resilient

Revenue rose 1.87% to a new fiscal third-quarter record of about $83 billion from $81 billion a year ago. Analysts had predicted a 1.7% rise.

“We are seeing some pockets of softness here and there,” Apple Chief Exectuvive

Tim Cook
said in an interview. “But in the aggregate, we expect revenue to accelerate in the September quarter as compared to the June year-over-year performance.”

IPhone sales, which are Apple’s biggest driver of revenue, rose 2.8% while analysts had expected a 2.5% drop. Sales of iPad tablets, Mac computers and wearables were affected by supply constraints, Mr. Cook said.

“There is no obvious evidence in our data that there is macroeconomic effect on iPhone sales,” Mr. Cook said. “On iPad and Mac, frankly, we didn’t have enough data from a supply point of view to really test the demand.”

Apple is seeing signs of the economy affecting sales in its wearables category and among some services, such as ads, he said.

Many investors were paying close attention Thursday to see what the results and any guidance would say about Apple and whether a strong dollar, inflationary fears, chip shortages and Covid-19 precautions in China will wreck what many are betting could still beat last year’s record performance.

Apple rival
Samsung Electronics Co.

, the world’s biggest maker of semiconductors, smartphones and televisions, on Thursday lowered expectations for industrywide smartphones this year. Shipments will be flat or experience minimal growth, the South Korean company said, after saying in April it expected growth.

Earlier in the week,
Microsoft Corp.
and Google-parent
Alphabet Inc.
reported April-through-June results that fell short of Wall Street expectations but showed investors that the companies are well-positioned to weather a recession.

“As we look to September, eyes are on FX [foreign-exchange] impact and any signs of a demand slowdown ahead of the iPhone 14 launch,” longtime Morgan Stanley analyst Katy Huberty wrote in her final note about Apple to investors, after being promoted to a new role.

In late 2020, Apple introduced iPhones with 5G capabilities that were touted as offering faster internet speeds to improve gaming and downloads, helping spark renewed interest in the gadget and fueling a record fiscal 2021 profit of $94.7 billion. Analysts are predicting iPhone profit for fiscal 2022, which ends in September, will be near $100 billion after a strong first half.

China, which has seen strict Covid-19 shutdowns, was expected to be a drag on Apple’s results after helping fuel record growth. Apple had warned in April that Covid-related supply disruptions around Shanghai and silicon shortages would hurt the company’s inventory and hinder sales by between $4 billion and $8 billion. Chief Financial Officer

Luca Maestri
also had warned that foreign-exchange rates and paused sales in Russia following the war in Ukraine would also limit growth.

On Thursday, Mr. Cook said those constraints were “slightly less” than what was predicted.

Other U.S. companies with heavy exposure to China have already shown how those shutdowns have hurt their businesses.
Tesla Inc.,
for example, last week reported its first sequential decline in quarterly profit in more than a year following an extended shutdown at its Shanghai assembly plant, while
General Motors Co.
’s China operations helped send profit down 40% in the quarter.

Apple’s Greater China region saw sales fall 1% from the same April-through-June period a year earlier. Analysts had expected an almost 7% decline.

In recent days, Apple has taken the unusual step of discounting iPhones in the China market.

Goldman Sachs estimates that iPhone China shipments improved in the month of May compared with April, when they fell 39%. “Our checks suggest an even stronger sales momentum in June as lockdowns were further reduced, likely driving realization of pent up demand,”

Rod Hall,
a Goldman Sachs analyst, wrote in a note to investors this month.

Apple’s results follow a Bloomberg News report that the company was planning to slow some hiring in the next fiscal year, joining other major tech companies who had already announced plans to pull back spending or lay off workers amid uncertain economic conditions. Apple declined to comment on the report. The company finished the previous fiscal year with 154,000 employees, according to a regulatory filing.

“We are making deliberate decisions about where to invest our money, but we’re continuing to hire, but we’re just doing it in a very deliberate way,” Mr. Cook said in the interview.

Write to Tim Higgins at Tim.Higgins@WSJ.com