Apple Shares Drop as Holiday Sales Forecast Misses Expectations
Nov 2 (Reuters) – Apple (AAPL.O) announced its sales forecast for the holiday quarter on Thursday and fell short of Wall Street expectations, mainly due to weak demand for iPads and wearables. This news caused Apple’s shares to decline about 3% in after-hours trading.
Chief Executive Tim Cook tried to ease concerns by stating that Apple’s new iPhone 15 models were performing well in China, disputing worries that the company was losing market share to local smartphone sellers like Huawei. Despite this reassurance, Apple’s revenue from China decreased by 2.5% in the fiscal fourth quarter.
Chief Financial Officer Luca Maestri informed analysts that sales for the current quarter, which includes the Christmas holidays and is typically when Apple sees its highest sales of new iPhone models, will be similar to the previous year. Analysts had anticipated a 4.97% rise in sales to $122.98 billion.
Following the forecast, Apple’s shares, which have risen 37% this year, dropped 3.4% in after-hours trading.
Maestri mentioned that Apple expects higher iPhone sales for the fiscal first quarter, even though this year’s holiday quarter has one less week of sales compared to the previous year.
Technology analyst Bob O’Donnell expressed surprise at Cook’s confidence in the future performance of Apple in China, considering the potential geopolitical challenges that the market faces.
Apple reported sales and profit for the fiscal fourth quarter that exceeded Wall Street expectations. This was mainly due to increased iPhone sales and a $1 billion boost in services revenue, which offset significant drops in Mac and iPad sales.
Cook stated that Apple’s new high-end models, the iPhone 15 Pro and Pro Max, are dealing with supply constraints.
Although Apple has handled the global smartphone slump better than its competitors, the company faces an uneven economic recovery in China, a critical market.
Tom Forte, analyst at DA Davidson, expressed relief that sales and profits exceeded expectations but expressed concern over weak sales in China.
Apple revealed that sales for the most recent quarter fell approximately 1% to $89.50 billion, but they exceeded analyst estimates of $89.28 billion. Net income increased by about 11%, and profit per share of $1.46 beat analyst expectations of $1.39 per share.
Apple is facing tougher competition in the smartphone market this year as Huawei Technologies returns with new phones powered by Chinese-made chips after being restricted by U.S. government trade curbs for several years.
Cook mentioned that despite the decline in sales, Apple’s business in China grew year-over-year when accounting for foreign-exchange rates, driven by iPhone sales and services revenue.
Apple anticipates reaching supply-demand balance for the iPhone 15 Pro and Pro Max models later this quarter. As of now, the iPhone remains Apple’s top-selling product.
Sales of Mac and iPad slumped by a third and 10% respectively, while wearables, including the Apple Watch and AirPods, experienced a 3% decline.
However, sales in Apple’s services segment, which includes Apple TV+ and a recent deal with Lionel Messi, increased by 16%.
Overall, Apple’s performance in the upcoming quarter is expected to improve, especially as supply issues for the top Pro and Pro Max models are resolved.
Apple also recently released new Mac machines, which are expected to boost the personal computer market in the coming year.
Reporting by Stephen Nellis in San Francisco and Yuvraj Malik in Bengaluru; Editing by Sayantani Ghosh, Peter Henderson, Matthew Lewis and Leslie Adler