Apple on Thursday forecast a drop in iPhone sales and targeted overall revenue US$6 billion below Wall Street expectations as its China business took a hit.
That overshadowed overall fiscal first-quarter sales and profit that beat analysts’ targets, powered by iPhone growth, sending Apple shares down 3 percent in after-hours trade.
The results confirmed some analysts’ concerns that the company’s signature product is losing ground in the key Asian market, where consumers are buying foldable phones and devices from Huawei Technologies Co (華為), powered by a China-made chip.
Photo: AFP
“China is the most competitive smartphone market in the world, and that hasn’t changed,” Apple CEO Tim Cook told reporters.
Apple’s iPhone sales there were down to the “mid-single digits” in the October-to-December quarter last year, when accounting for the currency exchange rate, he said.
“In China, Apple is facing more competitive challenges, not only because of Huawei, but also because of foldables, which is a very popular and fast-growing segment in China — and as we all know, Apple does not have a foldable device — yet,” International Data Corp analyst Nabila Popal said.
Apple said sales in China in the fourth quarter last year were US$20.82 billion, missing analyst estimates of US$23.53 billion, data showed.
Revenue this quarter is set to be at least US$5 billion less than a year ago, when the company sold iPhones rapidly to replenish inventories drawn down by COVID-19-related factory shutdowns, Apple chief financial officer Luca Maestri told analysts on a conference call.
Maestri’s comments implied a revenue forecast of about US$90 billion and iPhone sales of about US$46 billion for the fiscal second quarter that ends in March. Wall Street expected about US$96 billion in revenue and iPhone sales of US$50 billion. They were US$51 billion in the first quarter last year.
That would make it the company’s worst fiscal second quarter of iPhone sales since widespread COVID-19 lockdowns in March 2020.
“The drag would be China — and it has everything to do with their seasonality, and the elongated replacement cycle,” research firm Creative Strategies CEO Ben Bajarin said. “Regardless of what happens, [a drop in] year-over-year iPhone sales would be more of a concern than a quarter.”
For its fiscal first quarter, which ended on Dec. 30, Apple reported sales of US$119.58 billion and profit of US$2.18 per share, both above analyst expectations of US$117.91 billion and US$2.10 per share.
Sales of iPhones hit US$69.70 billion in the quarter, growing 6 percent to beat analyst expectations of US$67.82 billion, 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 earlier.
“We had particularly strong double-digit growth on iPhone in emerging markets outside of China,” Cook said.
Where Apple’s results disappointed, two other tech heavyweights — Amazon.com and Facebook owner Meta Platforms — reported quarterly results on Thursday which led to jumps in their share prices.
Microsoft last month eclipsed Apple as the world’s most valuable company, with investors viewing Apple as lagging in the artificial intelligence (AI) race among tech heavyweights.
Apple has rarely discussed generative AI, but Cook said on the conference call on Thursday that it was a “huge opportunity” and there was “a lot of work going on internally,” but that he did not plan to discuss it publicly until later this year.
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