Apple’s latest earnings show the Mac slumping and services soaring

Apple surpassed Wall Street expectations and said it had reached an all-time high in services revenue and set a new March quarter record for iPhone revenue in a report on its second quarter earnings on Thursday. The numbers show continued demand for the iPhone 14 lineup even as substantial upgrades (including USB-C connectivity) approach this fall. But Apple’s other divisions, including Mac and iPad, were down year over year.

“We are pleased to report an all-time record in services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high,” CEO Tim Cook said in the company’s earnings release. He told CNBC in an interview that, unlike other tech heavyweights that have laid off tens of thousands of employees in recent months, Apple isn’t considering broad cuts. “I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” Cook said.  

PC sales have experienced a bruising slump in recent months, with IDC and Canalys both reporting that worldwide shipments dropped by around 30 percent in the first quarter of 2023. Apple was the hardest hit among all major brands as consumers continue to cut down on gadget spending following a pandemic boom.

“There’s really two reasons for that,” Cook told CNBC when discussing Mac revenue. “One is the macro situation in general. And the other is where we’re still comparing to the very difficult compare of the M1 MacBook Pro 14 and 16-inch from the year-ago quarter.” Those MacBooks came with all-new designs, whereas the M2-based revisions were just a spec bump.

The company is rumored to be introducing a 15-inch MacBook Air and other machines in the coming weeks, which could give Mac sales some much-needed momentum. iPad revenue was down 13 percent compared to the year-ago quarter, and Apple’s wearables category fell by 1 percent.

Apple will kick off its annual developers conference in early June and is expected to showcase the latest major releases of iOS, iPadOS, macOS, wearOS, and tvOS. But more importantly, the WWDC keynote will mark the debut of Apple’s long-awaited mixed reality headset. As the first new major hardware category for Apple since the Apple Watch, rumors have said the high-tech headset will feature advanced eye and hand tracking, offer support for many existing apps, and it could sell for a price upwards of $3,000.