Apple Chief Financial Officer Luca Maestri indicated that revenue in the current quarter would be less than a year ago, when the quarter benefited from a post-COVID boost of about $5 billion in sales.
Excluding that gain last year, total and iPhone revenue in the March-ending quarter would be similar to a year earlier, he told analysts on a conference call.
Wall Street had been targeting just under $96 billion in sales, a small year-over-year rise, according to LSEG data, compared with Apple’s forecast of roughly $90 billion, which is $5 billion below last year’s figure.
Apple shares were down 3% in after-hours trade.
The 2% rise in overall fiscal first-quarter sales for the company ended four straight quarters of sales declines on the strength of its iPhone 15 lineup, which includes devices capable of capturing three-dimensional video for the Vision Pro headset being released this week. Apple’s total installed base of devices hit 2.2 billion, up from 2 billion a year ago.
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“We did feel good about the plus 6% (revenue growth) for iPhone,” Apple Chief Executive Tim Cook told Reuters in an interview. “We had particularly strong double-digit growth on iPhone in emerging markets outside of China. The iPhone is doing well in those markets.” He added: “China is the most competitive smartphone market in the world, and that hasn’t changed.”
Cook told Reuters that iPhone sales in mainland China were down “mid-single digits” in the quarter, when accounting for currency exchange rates, although the company’s installed base of iPhones in China is at an all-time high.
For its fiscal first quarter ended Dec. 30, Apple reported sales of $119.58 billion and profit of $2.18 per share, both above analyst expectations of $117.91 billion and $2.10 per share, according to data from LSEG.
Sales of iPhones hit $69.70 billion, growing 6% to beat analyst expectations of $67.82 billion, according to LSEG data.
Two other tech heavyweights, Amazon.com and Facebook owner Meta Platforms, reported quarterly results on Thursday which led to jumps in their share prices.
Apple’s results were seen as more mixed.
“The overall strength of iPhone 15 sales clearly reflected more pent-up demand for smartphones than expected, but the big miss in China is concerning as it could be the start of a longer downward trend there,” said Bob O’Donnell, an analyst at TECHnalysis Research.
Microsoft in January eclipsed Apple as the world’s most valuable company, with investors viewing Apple as lagging in the artificial-intelligence race between Wall Street’s tech heavyweights.
Apple has said it is researching generative AI but has instead focused on its Vision Pro headset, which analysts do not expect to bring meaningful revenue for several years.
In the shorter term, analysts are increasingly worrying about sales of Apple’s signature device in China, whose economy is navigating the burst of a real estate bubble. The iPhone also faces increasing competition in China and has fallen out of favor in government offices.
Apple said sales in China were $20.82 billion, missing analyst estimates of $23.53 billion, according to LSEG data.
Counterpoint Research reported China iPhone unit shipments fell during the quarter, with Chinese consumers looking to novel folding phones and homegrown rival Huawei, which re-entered the market with a flagship phone powered by a Chinese-made chip.
In the rest of Asia beyond China and Japan, Apple’s sales hit $10.16 billion, above analyst estimates of $9.75 billion, according to LSEG data. Cook said that iPhone sales hit an all-time high in South Korea, home to Apple’s longtime rival Samsung Electronics.
The biggest growth area for Apple during its fiscal first quarter was its services business, which includes the Apple TV+ service as well as music, iCloud storage and the App Store, and which rose 11% to $23.12 billion in sales. But those results were slightly below analyst expectations of $23.35 billion, according to LSEG data.
“The important services business was slightly lower than expected, which will likely be the most concerning item for investors since this business line continues to be the most important driver of growth,” commented analyst Gil Luria of D.A. Davidson.
Apple’s App Store also faces a challenge in Europe, where a new law that takes effect in March will allow developers to skip paying commissions to Apple and place alternative app stores on the iPhone.
Apple’s first-quarter Mac sales were up slightly to $7.78 billion, in line with analyst expectations of $7.73 billion, according to LSEG data. Sales of iPads were down 25% to $7.02 billion, missing expectations of $7.33 billion, according to LSEG data.
Apple’s wearables segment, which includes its AirPods and Apple Watch sales, fell to $11.95 billion after company executives had warned of weak demand. The results were just above expectations of $11.56 billion, according to LSEG data.
Several Apple Watch models have been at the center of a legal dispute with medical device maker Masimo and were briefly pulled from shelves before Apple removed a blood-oxygen monitoring features to comply with legal rulings and keep selling the devices.
(Reporting by Stephen Nellis in San Francisco; Additional reporting by Arsheeya Singh Bajwa and Yuvraj Malik in Bengaluru and Max A. Cherney and Peter Henderson in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)
