What happened
Shares of Apple (AAPL 3.32%) were up 3.5% as of 11:37 a.m. ET on Friday after the company delivered fiscal first-quarter earnings on Thursday following the market close.
The stock was initially trading lower at the market open today, as Apple's earnings and revenue came in below Wall Street's estimates. But a deeper dive shows there was a lot to like about its performance amid the macroeconomic challenges.
So what
The quarter was more challenging for Apple than last year. Revenue fell 5% year over year to $117.2 billion, with earnings per share coming in at $1.88. This missed estimates of $121.88 billion and $1.94, respectively. However, excluding the negative impact of foreign currency changes, revenue would have been up over the year-ago quarter.
Still, it was the growth in the installed base of devices, now over 2 billion, that points to a bright future. CEO Tim Cook touted the company's lineup of products and services as the best ever. iPhone revenue was flat year over year adjusted for currency, but the long wait times indicate that revenue could have been higher if not for the supply shortages.
Despite the headwinds, Apple has a nice synergy of products and services coming together. Services revenue surpassed $20 billion in the quarter -- nearly a fifth of Apple's business. The growth here has had a positive impact on Apple's profitability, with gross margin climbing well over 40% over the past three years.
Data by YCharts
Now what
Apple's growing installed base is the best indicator of a widening competitive moat. The more products customers buy, the more locked in they become with the Apple ecosystem. This should lead to many years of consistent revenue performance, as users spend on apps and subscriptions and upgrade to new hardware.
