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Last week, Apple (Nasdaq: AAPL) announced its third-quarter results that were ahead of expectations yet failed to truly impress the market. The company posted its third consecutive quarter of declining sales and expected a similar slowdown to continue in the current quarter.

Apple’s Financials

Apple’s third-quarter revenues fell 1% to $81.8 billion, significantly ahead of the market’s forecast of $81.69 billion. EPS was $1.26, surpassing the Street’s forecast of $1.19.

By segment, iPhone revenues fell 2% to $39.67 billion. Mac sales fell 7% to $6.84 billion and iPad sales fell 20% to $7.37 billion. Revenues from Wearables grew 2% to $8.28 billion. The services segment revenues grew 8% to $21.21 billion.

Apple did not provide any forecast for the fourth quarter. The market estimates revenues of $89.25 billion and an EPS of $1.39 for the fourth quarter. Analysts expect revenues of $383.12 billion and an EPS of $6.07 for the year.

Apple’s Product Growth

Apple recently concluded its Worldwide Developers Conference where it announced the launch of several updates to its products and software platforms. It showcased the possibilities of Apple Vision Pro, its 3D camera which allows users to capture spatial photos and spatial videos in 3D along with Spatial Audio. The immersive technology will allow users to view their library of photos and videos to relive those moments through panoramic high scale views. Apple Vision Pro has been built on decades of innovation and is being touted as the “most advanced personal electronic device ever created”. The initial reaction from press, analysts, developers, and content creators has been highly positive as well. Apple plans on launching the product for the consumers by early next year.

During the quarter, Apple also introduced the new 15-inch MacBook Air and two new powerhouses in computing: Mac Studio with M2 Max and M2 Ultra and Mac Pro with M2 Ultra. These are some of the most powerful Macs that Apple has ever made.

Apple’s Growth in Services Segment

Within its entire portfolio, though, Apple’s Services has had the most exciting quarter. The segment saw revenues grow 8% over the year and it set an all-time revenue record for total services across a number of categories, including video, AppleCare, cloud and payment services. Apple continues to build on the Apple Pay offering and noted that Apple Card has become one of the most successful credit card programs in the country with award-winning customer satisfaction. Earlier this year, Apple had introduced a new high-yield savings account for Apple Card customers, which has secured over $10 billion in deposits.

It continues to add more content to its TV and music portfolio. Apple TV+ added new series like Hijack and Silo along with new seasons for Foundation and The Afterparty. Its partnership with Major League Soccer (MLS) was rewarded when Lionel Messi made his debut with MLS last month, and users with the MLS Season pass were able to see him play as part of Inter Miami. Within Music, it launched new discovery features focused on live music that have been integrated with venue guides in Apple Maps and set lists from tours of major artists.

The market is rife with speculation that Apple is looking to acquire Disney (DIS). Of late, Disney has been struggling with both its revenue growth and profitability. Its streaming service recently reported a loss of $800 million in the third quarter. Disney has also been hurt by political issues and has had trouble reigniting it’s park business after Covid losses.

If the deal were to happen, it would make the merged entity a streaming force to reckon with. Apple would have access to Disney’s vast library of content, and Disney would gain access to Apple’s global distribution network and make inroads into international markets such as China where Apple has a much bigger presence than Disney.

But even if the companies were to agree to a deal, it would be a tough one for the FTC and DOJ to agree to. The two companies may not have a lot of overlap, but the size of the merged entity would result in a lot of scrutiny by federal agencies. Also, Disney’s park customers and retail investors may not be entirely thrilled with the idea of a tech giant like Apple running their Happiest Place on Earth. For now, neither of the companies have commented on a possible acquisition.

Apple’s stock is trading at $177.73 with a market capitalization of $2.8 trillion. It touched a year high of $198.23 in July. The stock was trading at year low levels of $124.17 in January.

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