Apple Inc. reported decreased sales for the third consecutive quarter and forecast similar results for the current quarter, affected by a general industry downturn that has reduced demand for phones, desktops, and tablets.
Luca Maestri, chief financial officer of the company, predicted that Apple’s performance will be similar this quarter during a conference call after the company revealed a 1.4% fall in revenue for the third fiscal quarter. The world’s most valuable firm would experience a shocking slowdown if there was one more decline, which would make the current slide streak the longest in 20 years.
The California-based company’s stock fell as much as 2.2% on Friday in US premarket trade. Through the close of 2023, Apple shares had increased by 47%, contributing to a larger tech-driven rise this year. Apple could lose its historic $3 trillion valuation, which it hit in June, if the price decline persists in regular trade.
According to Daniel Flax, senior research analyst at Neuberger Berman, “the environment is challenging,” in an interview with Scarlet Fu on Bloomberg Television. “Higher inflation and general interest rates are putting pressure on consumers. Apple, like many other businesses, cannot escape from many cross currents.
iPhone demand was weaker than anticipated, despite Apple’s overall revenue of $81.8 billion coming in barely beyond Wall Street projections last quarter thanks to record-setting services revenues.
Executives cited foreign exchange headwinds for poor earnings during the analyst conference call. The majority of the company’s revenue comes from abroad, but a higher dollar has hurt that. Maestri and Chief Executive Officer Tim Cook emphasized that sales would increase annually even if the exchange rate remained unchanged.
A decline that has alarmed rivals and partners hasn’t spared Apple’s highly coveted iPhone, the study revealed. With its earnings on Wednesday, Qualcomm Inc., a maker of mobile device chips and an iPhone supplier, alarmed investors about demand, sending its shares down before Apple released its report.
Apple released almost few new goods in the third quarter, aside from a bigger MacBook Air and minor improvements to its high-end desktop PCs.
With the new iPhone 15 and Apple Watches expected to be revealed in the current quarter, things will be different.
The iPhone, Apple’s top revenue generator, saw a 2.4% decline in third-quarter sales to $39.7 billion, below the $39.8 billion projection. It’s noteworthy that Apple’s leadership acknowledged that the smartphone industry is slowing dramatically, especially in the US.
Apple has been reducing spending as well. According to Maestri, the corporation has slowed hiring in a number of divisions. “We are extremely happy with our ability to slow down some expense growth.”
China stood alone, defying the trend among several of Apple’s tech competitors. According to Maestri, the Apple Watch and AirPods performed exceptionally well in the nation. As “the heart of our results there,” according to Cook, the iPhone fared well in China as well.
As the firm gets ready to release the next model, which is expected to be the biggest upgrade in three years, demand for the iPhone 14 model is starting to decline. In September, a few weeks before the conclusion of the fourth quarter, new iPhones usually make their appearance. Therefore, Apple’s fiscal first quarter, which is always its most lucrative quarter of the year, sees the majority of its revenue.
The new features included in the iPhone 15 Pro variants include a titanium frame, reduced bezels surrounding the screen, and quicker processors. However, it would still be difficult to convince some customers to upgrade given the slow condition of smartphone expenditure.
Apple has informed its suppliers that it anticipates that through the end of 2023, shipments of the iPhone would be roughly 85 million units, unchanged from the previous year.
Sales of other phone manufacturers’ products have also slowed or stagnated, including Samsung Electronics Co.
Apple anticipates an improvement in the iPhone and service performance year over year for the current quarter. That will outperform the Mac and iPad divisions, which the business predicted would experience double-digit percentage declines.
Cook addressed a contentious topic by stating that the business has been looking into generative AI technology for a long time. Bloomberg reported last month that Apple has created its own massive language model, a tool similar to the one used to train OpenAI Inc.’s ChatGPT, an AI chatbot, and is gearing up for a push into generative AI in 2019. Based on text prompts, these programs can produce written material or graphics.
Meanwhile, sales of the iPad decreased 20% in the most recent quarter. In contrast to expectations of roughly $6.33 billion, that business generated $5.79 billion. Since last year, Apple hasn’t upgraded any of its tablets, and it won’t make any major modifications to the lineup until 2024. The business is getting ready to introduce an updated iPad Pro with a better display.
Apple made an attempt to justify its tablet problems by drawing a harsh parallel to the release of the iPad Air the previous year. The revenue from all iPads still only makes up a minor portion of that strategy.
Tablet and Mac sales will be down this quarter in part because to 2022 manufacturing shutdowns, according to Apple. In the third quarter of that year, the disruption made it difficult for customers to purchase goods, which caused a rise in the following quarter. This time, according to Apple, the corporation won’t experience that impact.
Even with the ongoing recession, the Mac did perform better than anticipated this past quarter. Even while its sales decreased 7.3% to $6.84 billion, they nevertheless above the $6.37 billion average projection. The new, bigger MacBook Air and professional desktop PCs were unveiled in June, making Macs the only significant new goods Apple released during the third quarter.
The Apple Watch and AirPods are part of the wearables, home, and accessories division, which generated $8.28 billion in revenue. This fell short of predictions by $8.38 billion. Although there won’t be many new features, Apple is getting ready to deliver new watches in September with improved performance and fresh colors. Three new models were introduced by the company last fall, including a high-end Ultra version, which helped raise the average selling price.
A definite high point was the 8.2% increase in services income to $21.2 billion. This exceeded expectations of $20.8 billion. According to Cook, the surge was “fueled by over 1 billion paid subscriptions.”
The Cupertino, California-based business mentioned Apple Music and advertising as two record-setting segments, and it also said that its collaboration with Major League Soccer is doing better than expected. Earlier this year, Apple started showing league games on its TV+ streaming service.
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