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 Inc (SNAP.N) and Meta Platforms Inc (META.O).

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.”

Citing the economic uncertainty, Apple said it was not providing specific revenue guidance. But it said sales compared to a year ago should rise faster in the current quarter than 2% growth it posted in the just-ended quarter.

‘MORE DELIBERATE’

Overall, Apple said quarterly sales and profit were $83.0 billion and $1.20 per share, above estimates of $82.8 billion and $1.16 per share, according to Refinitiv data.

The rising U.S. dollar has hit many companies such as Apple that generate substantial foreign revenue and are getting less cash back when they convert it. Apple said currency fluctuations slashed sales by 3% in the June quarter and would crimp them by 6% in the current quarter.

Shuttering its business in Russia earlier this year due to the war also has hurt sales.

Apple, like many of its tech industry peers, is slowing hiring and cutting costs given the tough economic climate.  Cook said Thursday that Apple was “being more deliberate in (hiring) in recognition of the realities of the environment.”

The most recent economic woes include supply chain disruptions that have hit production of some Apple products such as iPads and Macs whose assembly locations were clustered near regions of China that went into COVID lockdowns.

While sales of iPhones and iPads topped expectations, revenue from services, Mac computers and accessories missed Wall Street targets and sales in the crucial China market fell 1% as consumers being on lockdown there limited sales.

Apple also is confronting slow overall economic growth in China, where its fiscal third-quarter sales were $14.6 billion.

Growth in the company’s services business, which has provided a boost to sales and profits in recent years, was 12%, below the previous year’s 33% rate and resulting in $19.6 billion in revenue, below estimates of $19.7 billion.

Apple said it now has 860 million paying subscribers to its services, up from the previous quarter’s 825 million.

Sales of iPads and Macs were $7.2 billion and $7.4 billion, compared with estimates of $6.9 billion and $8.7 billion. Mac sales represented a 10% contraction, after record sales since 2020, first from a work-from-home boost and then from Apple’s new proprietary processor chips.