Apple’s gross margin declined to 35.9% in the third quarter of 2022, marking a significant drop from the company’s 43.8% gross margin in the previous quarter, market data has shown.
Gross margin is the sum of net sales less the cost of goods sold (COGS). The higher the gross margin, the more capital a company retains, which it then uses to pay off other costs or satisfy debt obligations.
“Apple suffered supply bottlenecks and shutdowns in China. Yet, sales of iPhones continued to increase. Thus, demonstrating that the company is robust despite economic headwinds,” explained TradingPlatforms.com specialist, Edith Reads.
“The gross margin decline is the biggest since 2020,” she added.
iPhone to the rescue
Clients are struggling with fears of recession and rising inflation worldwide. The anxiety has decreased demand for cell phones, computers, and other pieces of technological goods.
Apple may undergo a prolonged phase of sluggish growth or maybe no growth at all, Reads added.
However, for the time being, Apple’s iPhone is still bringing in more revenue. During the third quarter, the iPhone business brought in a total of $40.67 bln, a 3% increase from the previous year. According to the business, demand for all varieties of the iPhone 13 remained robust.
As a general rule, Apple unveils its newest iPhone models in September, which typically results in a decline in sales as buyers wait for an upgrade.
What’s in store
Apple stock gained more than 3% after it announced its quarterly returns. Even though the firm did not issue formal guidance for the next quarter, experts have set their sights on specific numbers.
Apple’s current earnings per share expectation for the fourth quarter is $1.31, with revenues expected to come in at around $90 bln.
Furthermore, CEO Tim Cook elaborated on how Apple is coping with inflationary pressure in the face of rising interest rates. He indicated that Apple would continue spending money, even though many other firms are cutting costs to be profitable.