Apple (AAPL) reported better-than-expected June quarter earnings while revenue for the quarter came in at $82.96 billion, effectively matching the consensus forecast. iPhone revenue for the quarter was $40.67 billion vs. the $38.3 billion consensus and the $39.6 recorded in the year-ago quarter. iPad revenue was $7.2 billion vs. the $6.9 billion consensus but was down compared to $7.4 billion last year. Mac revenue of $7.4 billion missed the consensus forecast of $8.8 billion and was down from $8.2 billion in the year-ago quarter. Similarly, the company's wearables revenue was $8.1 billion vs. the expected $9.0 billion and $8.8 billion in the year-ago quarter. Services revenue was $19.6 billion in the June quarter vs. a $19.9 billion consensus but up from $17.5 billion in the year-ago quarter.

While Apple did not provide specific revenue guidance, it shared that it expects its September quarter revenue to accelerate sequentially, supply constraints to improve, and its service revenue growth to slow compared to the June quarter. With second-quarter 2022 supply chain issues that limited iPhone, iPad, and Mac availability the sequential guidance to us makes sense. The thing we like even more, however, is that Apple exited the June quarter with 860 million paid subscribers, up 160 million over the last 12 months. That should add to the predictability of Apple's Service revenue, which during the June quarter was just under half that for iPhone, helping further ease iPhone concertation concerns.

Comments received so far this earning season, including those from Samsung (SSNLF) and Qualcomm (QCOM) , point to demand for higher-end smartphones holding up far better than that for lower-tier ones. That certainly plays to Apple's strengths, but given the rising interest rate environment and slowing economic growth we have some near-term concerns over the upgrade cycle for iPhone. Medium to longer term, we continue to see consumers upgrading to 5G models as more robust applications requires 5G network speeds and its lower latency, but in the near term cash-strapped consumers may hold out longer than they have in the past

With Apple's better-than-expected quarter in hand, we'll bump our price target to $175 from $160 and for now keep our Two rating. Similar to other comments we've made this week, we'll look to revisit that Two rating on signs consumer spending and or Phone 14 model uptake is better than expected.

At the time of publication, Action Alerts PLUS was long AAPL.