Apple has issued a cautious outlook for iPhone sales and overall revenue, falling $6 billion short of Wall Street expectations, citing challenges in its China business.
Despite reporting fiscal first-quarter sales and profit that exceeded analysts’ projections, driven by growth in iPhone sales, Apple witnessed a 3% decline in its shares during after-hours trading.
The results underscored concerns among analysts regarding Apple’s flagship product’s performance in the crucial Asian market, where consumers are increasingly opting for foldable phones and Huawei devices powered by China-made chips.
In an interview with Reuters, Apple CEO Tim Cook acknowledged the competitive landscape in China, revealing that iPhone sales in the region declined “mid-single digits” in the December quarter, accounting for currency exchange rates.
IDC analyst Nabila Popal noted that Apple faces stiff competition in China not only from Huawei but also from the burgeoning popularity of foldable devices, a market segment Apple has yet to enter.
Apple reported sales of $20.82 billion in China for the December quarter, falling short of analyst estimates of $23.53 billion, according to LSEG data.
Chief Financial Officer Luca Maestri informed analysts during a conference call that revenue for the current quarter would be at least $5 billion lower than the previous year, primarily due to weaker iPhone sales. This implied a revenue forecast of approximately $90 billion and iPhone sales of around $46 billion for the fiscal second quarter ending in March, below Wall Street’s expectations of nearly $96 billion in revenue and $50 billion in iPhone sales.
Apple’s fiscal first-quarter results, ending on December 30, saw sales of $119.58 billion and profit of $2.18 per share, surpassing analyst expectations of $117.91 billion and $2.10 per share, respectively.
iPhone sales totaled $69.70 billion for the quarter, growing by 6% and exceeding analyst projections of $67.82 billion, driven by the success of the iPhone 15 lineup. Additionally, Apple’s total installed base of devices reached 2.2 billion, up from 2 billion a year earlier.
While Apple’s results were overshadowed by disappointments in iPhone sales and revenue projections, other tech giants like Amazon.com and Meta Platforms reported quarterly results that led to increases in their share prices.
Cook also hinted at the company’s focus on generative AI, calling it a “huge opportunity” and indicating ongoing internal efforts in the domain, though he refrained from discussing it publicly until later this year.
Apple’s services business, including Apple TV+, music, iCloud storage, and the App Store, saw an 11% rise in sales to $23.12 billion during the fiscal first quarter, slightly below analyst expectations.
Looking ahead, Apple faces challenges in Europe with a new law set to take effect in March, allowing developers to bypass commissions to Apple and introduce alternative app stores on the iPhone.
While Mac sales met analyst expectations at $7.78 billion, iPad sales fell short, declining by 25% to $7.02 billion. Sales of wearables, including AirPods and Apple Watch, slightly surpassed analyst targets at $11.95 billion, despite weak demand.
The introduction of Apple’s Vision Pro headset into the wearables segment is anticipated in subsequent quarters, though meaningful revenue from the device is not expected for several years. Additionally, legal disputes with medical device maker Masimo regarding certain Apple Watch models have garnered attention, resulting in the removal of blood-oxygen monitoring features to comply with legal rulings.
