Apple on Thursday forecast sales would continue to decline in the current quarter, sending shares tumbling despite beating Wall Street sales and profit targets for the fiscal third quarter.
Shares of Apple fell nearly 2 percent after the company predicted it could post a fourth consecutive quarter of sales decline. For the recently ended period, strength in services drove profit, but weaker-than-expected sales of Apple’s most famous device, the iPhone, disappointed investors. Executives said iPhone sales would improve in the fourth quarter, but did not say how much.
Apple is in a delicate position, with its iPhone struggling for mature market share against Android rivals, while its next big product – the Vision Pro mixed-reality headset announced in June – is not yet in the hands of consumers.
Apple said sales fell 1.4 percent to $81.8 billion (roughly Rs. 6,77,034 crore) in the fiscal third quarter ended July 1 and earnings per share rose 5 percent to $1.26 (roughly Rs. 104). That came to $81.69 billion (roughly Rs. 6,72,568 crore) per share and topped analyst expectations of $1.19 (roughly Rs. 98), according to IBES data from Refinitiv. Weak iPhone sales were offset by strong sales in the services sector, including Apple TV+, and sales in China increased 8 percent year over year.
Apple Chief Financial Officer Luca Maestri said the company expects year-over-year revenue performance in its fiscal fourth quarter ending in September, the company reported Thursday. The sales forecast fell short of analyst expectations for nearly flat fiscal fourth-quarter sales of $90.19 billion (roughly Rs. 7,46,412 crore), according to Refinitiv data.
“There’s real concern about when volumes pick up and what the horizon is for iPhone sales growth,” said Daniel Newman, chief executive and principal analyst at research firm Futurum Group.
Apple pegged its September quarter gross profit margin at 44 percent to 45 percent, better than analysts’ expectation of 43.4 percent, according to Refinitiv data. While Apple expects growth in its services segment that includes Apple TV+, iPad and Mac sales will fall by “double digits,” Maestri said on the call.
Apple’s research and development spending has also reached $22.61 billion (roughly Rs. 1,87,131 crores) so far this fiscal year, which is about $3.12 billion (roughly Rs. 25,822 crores) more than last year.
Apple Chief Executive Tim Cook told Reuters in an interview that the increase in R&D spending was partly driven by work on generative artificial intelligence, the same area that is driving spending at other big technology companies.
Cook said, “We have been researching a wide range of AI technologies, including generative AI, for years. We continue to invest and innovate with these technologies and responsibly advance our products to help enrich people’s lives.” will continue.” “Obviously, we’re investing a lot, and that’s reflected in the R&D spending that you’re seeing.”
China’s strength
Meanwhile, Apple appeared to be outperforming China’s weakest smartphone market in nearly a decade. Total smartphone sales in China declined 8 percent in the calendar second quarter to the lowest level since 2014, according to Counterpoint Research. In contrast, Cook told Reuters that Apple’s iPhone sales in China grew by “double digits” and that sales in other regions in China were also higher.
This helped Apple increase sales in its Greater China region to $15.76 billion (about Rs 1,30,436 crore), from $14.60 billion (about Rs 1,20,835 crore) in the same quarter last year.
“This was actually driven by attracting a quarterly record number of people switching to iPhone, as well as a strong upgrader activity,” Cook said. “We also set quarterly records for both wearables, home goods and accessories and services in China.”
Apple said iPhone sales were $39.67 billion (roughly Rs. 3,28,328 crores), less than analysts’ expectations of $39.91 billion (roughly Rs. 3,30,295 crores), according to Refinitiv data. Cook said the installed base of iPhones reached a new high but gave no numbers.
Insider Intelligence analyst Jeremy Goldman said, “The company continues to face headwinds due to declining growth in the smartphone market.” “All eyes are now on its earnings call for potential Vision Pro or AI-related announcements that could further push the boundaries of their business model.”
Apple’s services segment, which includes its Apple TV+ service, which has announced a deal to carry Major League Soccer, had revenue of $21.21 billion (roughly Rs. 1,75,544 crores), compared with analysts’ estimates of $20.76 billion. (Approximately Rs 1,71,814). crore), according to Refinitiv data.
Cook said Apple now has 1 billion customers on its platform, which includes both Apple services and third-party apps, up from 975 million a quarter ago.
The company’s wearables business, which includes Apple Watch and AirPods, had revenue of $8.28 billion (roughly Rs. 68,529 crores), according to Refinitiv data, compared with analysts’ estimates of $8.39 billion (roughly Rs. 69,439 crores).
Mac and iPad sales were $6.84 billion (roughly Rs. 56,611 crores) and $5.79 billion (roughly Rs. 47,918 crores), respectively, compared to analysts’ estimates of $6.62 billion (roughly Rs. 54,791 crores) and $6.41 billion (roughly Rs. 53,049 crores). ), according to Refinitiv data.
“Nearly half of Mac buyers during the quarter were new to the product, and we’re seeing strong upgrader activity for Apple silicon,” Cook told Reuters.
© Thomson Reuters 2023
