Apple forecasts faster sales growth, despite glum economy

Apple on Thursday said parts shortages are easing and that demand for iPhones is unceasing despite consumers tightening other spending, helping it top Wall Street expectations and forecast faster sales growth ahead.

The Silicon Valley giant’s shares rose 3.5% after hours following the release of the results.

Though macroeconomic indicators around the world are turning negative, Chief Financial Officer Luca Maestri told Reuters there had been no slowdown in demand for iPhones, the company’s biggest source of revenue.

Phone sales in the fiscal third quarter rose 3% to $40.7 billion, when Wall Street had braced for a 3% decline. By contrast, the overall global smartphone market dropped 9% during the just-ended quarter, according to Canalys data.

Apple’s loyal and relatively affluent customer base has enabled it to weather consumer spending dips better than other brands in the past, and the company’s latest quarterly results suggest a similar pattern emerging.

Canalys Research analyst Runar Bjorhovde said, “Apple in that sense has a certain robustness that will allow it to be impacted less than a lot of its competitors.”

The slumping economy is hurting sales of advertising, accessories and home products, Apple’s Maestri said in an interview, calling the units “pockets of weakness.”

“Fortunately, we have a very broad portfolio, so we know we’re going to be able to navigate that,” he added.

The results show Apple’s advertising business, which includes selling ads alongside news articles and app store search results, is vulnerable to marketing cuts just the same as rivals Snap and Meta Platforms.

Parts shortages will continue to hamper Mac and iPad sales, Maestri said, though the impact has been easing. They cost Apple under $4 billion in sales in the quarter ended June 25, less than it had forecast. Maestri said the company expects the hit to diminish further in the current quarter.

But Apple risks joining rivals in amassing an unsellable stockpile of tablets and PCs if more customers than expected hold off purchases due to rising inflation and interest rates.

“In terms of testing the demand, you can’t really test the demand unless you have the supply,” Apple Chief Executive Tim Cook told analysts on Thursday. “And we were so far from that last quarter that we have an estimate of what we believe demand was. But it is an estimate.”