Apple Inc on Thursday forecast that sales declines would continue into the current quarter, even as its fiscal third-quarter sales and profit targets exceeded Wall Street’s targets, sending shares lower.
Apple forecast that sales may continue to decline in the fourth quarter, causing the company’s stock price to fall by about 2%. Profit growth was driven by strength in the services sector in the period just ended, but investors were frustrated by weaker-than-expected sales of Apple’s most famous device, the iPhone. Executives said iPhone sales would improve in the fourth quarter but did not disclose how much.
Apple is in a delicate position, with its entrenched iPhone battling Android rivals for market share in a mature market, and its next big product — the Vision Pro mixed-reality headset it released in June — yet to reach consumers.
Apple said sales fell 1.4 percent to $81.8 billion (Rs 677,034 crore) in the fiscal third quarter ended July 1, while earnings per share rose 5 percent to $1.26 (Rs 104 crore). That beat analysts’ expectations of $81.69 billion (about Rs 67,256.8 crore) and $1.19 (about Rs 98) per share, according to IBES data from Refinitiv. Weakness in iPhone sales was offset by strong sales in the Services segment, including Apple TV+, and an 8% year-over-year sales increase in China.
Apple Chief Financial Officer Luca Maestri said the company expects revenue in the fiscal fourth quarter ending in September to be similar to the year-earlier decline. The sales forecast is lower than analysts’ expectations for fiscal fourth-quarter sales to be roughly flat at $90.19 billion (approximately Rs. 7,46,412 crore), according to Refinitiv data.
“The real concern is when sales will pick up and what is the outlook for iPhone sales growth,” said Daniel Newman, chief executive and chief analyst at research firm Futurum Group.
According to Refinitiv data, Apple expects gross profit margin in the September quarter to be 44% to 45%, higher than analysts’ expectations of 43.4%. Maestri said on the call that while Apple expects growth in its services segment, including Apple TV+, sales of iPads and Macs will decline by “double digits.”
Apple has also spent $22.61 billion (Rs 187,131 crore) on R&D so far this fiscal year, which is about $3.12 billion (Rs 258.22 crore) higher than the same period last year.
In an interview with Reuters, Apple Chief Executive Tim Cook said the increase in research and development spending was driven in part by work to generate artificial intelligence, an area that is also driving spending at other big tech companies.
Cook said: “For years, we have been researching various artificial intelligence technologies, including generative artificial intelligence. We will continue to invest and innovate and use these technologies responsibly to improve our products to help enrich people’s lives. life.” “Obviously, we’ve invested a lot of money and that shows in the R&D spend you see.”
China’s strength
Meanwhile, Apple appears to be outperforming China’s weakest smartphone market in nearly a decade. Data from Counterpoint Research shows that smartphone sales in China fell 8% in the second quarter to the lowest level since 2014. By contrast, Apple’s iPhone sales in China grew by “double digits” and sales in other segments of the country were also high, Cook told Reuters.
This helped Apple boost sales in Greater China to $15.76 billion (Rs 130,436 crore) from $14.6 billion (Rs 120,835 crore) a year earlier.
“This was actually achieved by attracting a record quarter of iPhone replacers and strong upgrade activity,” Cook said. “We also set quarterly records in China for wearables, home, accessories and services.”
According to data from Refinitiv, Apple said iPhone sales were US$39.67 billion (approximately Rs. 3,28,328 crore), lower than analysts’ expectations of US$39.91 billion (approximately Rs. 3,30,295 crore). Cook said iPhone installations hit a new high, but did not disclose specific numbers.
“The company continues to face headwinds from a slowdown in the smartphone market,” said Insider Intelligence analyst Jeremy Goldman. “All eyes will now be on its earnings call for anything that might push the boundaries of its business model further.” Vision Pro or AI related announcements.”
Apple’s services segment, which includes the Apple TV+ service, which has announced a partnership with Major League Soccer, recorded revenue of $21.21 billion (Rs 175,544 crore), compared to analyst estimates of $20.76 billion (Rs 171,814 crore). crore), according to Refinitiv data.
Cook said Apple currently has 1 billion users on its platform, which includes Apple services and third-party applications, up from 975 million users a quarter ago.
According to Refinitiv data, the company’s wearables business, which includes Apple Watch and AirPods, generated revenue of $8.28 billion (approximately Rs. 68,529 crore), compared with analysts’ estimates of $8.39 billion (approximately Rs. 69,439 crore).
Sales of Mac and iPad were $6.84 billion (approximately Rs. 56,611 crore) and $5.79 billion (approximately Rs. 47,918 crore) respectively, compared with analyst estimates of $6.62 billion (approximately Rs. 54,791 crore) and $6.41 billion (approximately Rs. 53,049 crore). rupee)), according to Refinitiv data.
“Almost half of Mac buyers this quarter were new to the product, and we continue to see strong upgrade activity on Apple Silicon,” Cook told Reuters.
© Thomson Reuters 2023
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