HomeBusinessApple sees sales slump...

Apple sees sales slump continuing, shares drop 2% despite beating sales expectations


Aug 3 (Reuters) – Apple (AAPL.O) on Thursday forecast that a sales slump would continue into the current quarter, sending shares down despite beating Wall Street sales and profit targets in the fiscal third quarter.

Apple shares dropped about 2% after the company predicted what could be the fourth quarter in a row of declining sales. For the just-ended period, strength in services drove the profit beat, but weaker than expected sales of Apple’s most famous device, the iPhone, underwhelmed 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 entrenched iPhone battling for share against Android rivals in a mature market, 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 for the fiscal third quarter ended July 1 fell 1.4% to $81.8 billion and earnings per share rose 5% to $1.26. That topped analyst expectations of $81.69 billion and $1.19 per share, according to IBES data from Refinitiv. Weaker iPhone sales were balanced by strong sales in the services segment that contains Apple TV+ and by sales in China that grew 8% year over year.

Apple Chief Financial Officer Luca Maestri said the company expects a year-over-year revenue performance in the company’s fiscal fourth quarter ending in September similar to the drop the company reported on Thursday. That sales forecast is below analyst expectations of roughly flat fiscal fourth-quarter sales of $90.19 billion, according to Refinitiv data.

“There is a real concern about when volume picks 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 the gross profit margin in the September quarter at 44% to 45%, above analyst expectations of 43.4%, according to Refinitiv data. While Apple expects growth in its service segment that contains Apple TV+, iPad and Mac sales will fall by “double digits,” Maestri said on the call.

Apple’s research and development spending also hit $22.61 billion for the fiscal year so far, about $3.12 billion higher than at this point in the previous year.

Apple Chief Executive Officer Tim Cook told Reuters in an interview that the increased R&D spending was in part driven by work on generative artificial intelligence, the same field that is driving spending at other big technology companies.

“We’ve been doing research across a wide range of AI technologies, including generative AI, for years. We’re going to continue investing and innovating and responsibly advancing our products with these technologies to help enrich people’s lives,” Cook said. “Obviously, we’re investing a lot, and it is showing up in the R&D spending that you’re looking at.”

Logo of an Apple store is seen as Apple Inc. reports fourth quarter earnings in Washington, U.S., January 27, 2022. REUTERS/Joshua Roberts

CHINA STRENGTH

In the meantime, Apple appeared to outperform what has been the weakest smartphone market in China in almost a decade. Overall smartphone sales declined 8% in China in the calendar second quarter to their lowest levels since 2014, according to Counterpoint Research. By contrast, Cook told Reuters that Apple’s iPhone sales in China grew by “double digits” and that sales were also high in other segments in China.

That helped Apple push sales in its greater China region to $15.76 billion, from $14.60 billion in last year’s same quarter.

“This was really done by attracting a quarterly record of switchers to the iPhone, as well as having a strong upgrader activity,” Cook said. “We also set quarterly records in China for both wearables, home and accessories, and services.”

Apple said iPhone sales were $39.67 billion, below analyst expectations of $39.91 billion, according to Refinitiv data. Cook said the installed base of iPhones hit a new high but gave no numbers.

“The company continues to face headwinds caused by waning growth in the smartphone market,” said Insider Intelligence analyst Jeremy Goldman. “All eyes are now on its earnings call for any 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 $21.21 billion in revenue, compared with analyst estimates of $20.76 billion, according to Refinitiv data.

Cook said Apple now has 1 billion subscribers 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 the Apple Watch and AirPods, had revenue of $8.28 billion, compared with analyst estimates of $8.39 billion, according to Refinitiv data.

Mac and iPad sales were $6.84 billion and $5.79 billion, respectively, compared with analyst estimates of $6.62 billion and $6.41 billion, according to Refinitiv data.

“Almost half of the Mac buyers during the quarter were new to the product, and we continue to see strong upgrader activity to Apple Silicon,” Cook told Reuters.

Reporting by Stephen Nellis in San Francisco and Yuvraj Malik in Bengaluru
Editing by Peter Henderson and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.



Source link

Most Popular

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More from Author

Read Now

Stock futures inch lower Tuesday night as investors await fresh inflation data: Live updates

An Hour AgoInvestors should eye emerging markets and small caps outside of the 'Magnificent 7' stocks, Richard Bernstein says Investors should turn their attention to alternative investments including small caps and emerging markets outside of the "Magnificent 7" stocks, according to Richard Bernstein Advisors chief Richard...

Bears offer hint at Justin Fields-Caleb Williams decision while trying to say nothing

INDIANAPOLIS -- The Bears maintain that they arrived in Indianapolis for the 2024 NFL Scouting Combine still early in the information-gathering stage of their franchise-defining quarterback journey. Both general manager Ryan Poles and head coach Matt Eberflus talked Tuesday in Indianapolis, painting a picture of a...

Crosstown Trade: White Sox and Cubs swap pitchers

The White Sox and Cubs swapped minor-league pitchers, the South Side announced. The Cubs are sending Bailey Horn to the White Sox in exchange for Matt Thompson. The trade helps the Cubs open a roster spot for Cody Bellinger, who they recently re-signed to the tune...

A surge fee on your Frosty? Wendy’s to test ‘dynamic pricing’ in 2025.

The deals at Wendy’s may soon not be as square as their burgers.The fast-food chain is set to start experimenting with dynamic pricing at company-owned stores next year. Wendy’s CEO Kirk Tanner said the company will soon spend $20 million to swap in digital menu boards,...

Gary Sinise’s Son Mac Dies Of Rare Cancer At 33

Gary Sinise foundation McCanna “Mac” Anthony Sinise, the musician son of actor Gary Sinise, has died of the rare spinal cancer Chordoma, the Forrest Gump star announced today. Mac Sinise, who had recently completed work on his album Resurrection & Revival, died on January 5 following a years-long...

No, No, No, Rep. Ken Buck Doesn’t Want Biden Impeached, Just Kicked Out Of Office For Being Old

None of them can be trusted, Part The CXLVII. From Politico:Buck's (R-Colo.) resolution urges Harris to convene the Cabinet to “declare what is obvious to a horrified Nation: That the President is unable to successfully discharge the duties and powers of his office.” The retiring conservative...

Palworld Devs Are Sorry For Fixing The Game

Don’t you just hate it when a glitch you exploit in your fave video game gets fixed? I do, too, and apparently, so do Palworld players. Developer Pocketpair recently patched up a popular bug-turned-feature in the Pokémon clone that let players do something they weren’t actually...

MWC 2024: Everything announced so far, including HTC’s VR headset, ‘rollable’ Motorola concept phone | TechCrunch

The TechCrunch team is in Barcelona this week to bring you all the action going on at Mobile World Congress 2024. You already know what we’re expecting, so sit back, relax and stay tuned throughout the week as we bring you the products, announcements and startup...

You can save $20 on several Nintendo Switch games for Pokémon Day

Oh, would you look at that. It’s Pokémon Day, an annual celebration commemorating the game’s launch on this very day in 1996. Fun fact: Pokémon was first a video game, but it was quickly adapted as a trading card game and anime, both of which are...