Apple sales miss estimates on sluggish economy, supply snags

Apple sales miss estimates on sluggish economy, supply snags
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(Feb 3): Apple Inc reported a steeper sales decline in its holiday period than Wall Street feared, showing the toll of an economic slowdown and lingering supply snags on what was long one of the tech industry’s most resilient companies.

Revenue in the fiscal first quarter dropped 5.5% to US$117.2 billion, the company said in a statement on Thursday. That was well short of the average Wall Street estimate of US$121.1 billion, and the results sent Apple shares sliding as much as 5.6% in late trading.

The iPhone and Mac were particular weak spots for Apple during the quarter, dragged down by a broader slump afflicting mobile devices and computers. Covid-19 restrictions in China added to Apple’s woes, making it harder to ship enough of the most popular versions of the iPhone. Timing was another issue: The company didn’t launch new Macs and HomePods until recent weeks, missing the end of the first quarter.

Earnings came in at US$1.88 per share, compared with an average estimate of US$1.94 per share. The Cupertino, California-based technology giant didn’t provide a revenue outlook for the second quarter, continuing an approach it adopted at the start of the Covid pandemic in 2020.

Apple shares had closed up 3.7% at US$150.82 in New York. They have gained 16% this year.

Chief executive officer Tim Cook cited a “challenging environment” in the statement. “We remain focused on the long term,” he said.

Apple generated US$65.8 billion from the iPhone in the period, which ended Dec 31, missing the estimate of US$68.3 billion. That also represents a decline from the US$71.6 billion that the product brought in a year earlier.

While the latest iPhone was a more significant leap than the previous version, the factories producing the popular Pro models in China were shuttered for weeks during the quarter due to pandemic restrictions. 

The company made US$7.74 billion from the Mac, far short of the US$9.7 billion estimate. That’s also a significant drop from US$10.9 billion a year ago.

It was a tough year-over-year comparison given that Apple launched a revamped MacBook Pro line in the previous holiday period. This time around, it didn’t update the MacBook Pro and Mac mini models until the current quarter.

The wearables, home and accessories division — a unit that includes the Apple Watch, HomePod speakers, Apple TV, AirPods and Beats products — brought in US$13.5 billion. That fell short of Wall Street expectations of US$15.3 billion. The division’s sales also represented a decline from last year’s US$14.7 billion.

Other areas fared better. The iPad brought in US$9.4 billion, beating the estimate of US$7.8 billion. Apple launched minor iPad Pro updates and a revamped entry-level model in October. That led to growth from a weaker iPad quarter a year ago.

Services generated US$20.8 billion, exceeding estimates of US$20.5 billion and growing from US$19.5 billion a year ago. A price hike helped. The cost of Apple Music climbed by US$1 per month, with Apple TV+ going up by US$2. The category also includes the App Store, AppleCare customer service and repairs, and offerings like Arcade and News+. 

Chief financial officer Luca Maestri noted that the services revenue was a record total and that — holding currency constant — the company increased its overall sales.

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