Apple slips after iPhone and services revenue comes to light

Although sales of iPhone and services were lower than expected in the previous quarter, Apple’s revenue and profit both remained on top of analysts’ estimates. The company said growth won’t be as strong during the current period, but investors found enough optimism to send the stock higher in trading late on Thursday.

It has acquired Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. And provided a sharp contrast with others, who all reported disappointing earnings in recent days, causing their shares to plummet.

Even Apple’s generally positive results raised questions for investors, who have been looking for signs that the long-resilient company may finally be the victim of a slowing economy. Sales of Apple’s iPhone and services were just shy of estimates — concerns about two sectors that were expected to be strong performers. And Apple’s Mac computer business will decline significantly in the holiday quarter after sales growth driven by new models, Chief Financial Officer Luca Maestri warned on a conference call.

The news whipsawed Apple shares during the afternoon, with the stock initially falling as much as 6%, but then narrowing the losses. Shares were up 1.2% as of 6:26 p.m. New York time.

With loyal customers still eager to snap up its valued products, Apple has been seen as an outlier during a punitive tech meltdown. The company also released its latest iPhone earlier in the year than usual, taking a sizable chunk of sales from Apple’s flagship device in the fiscal fourth quarter. But rising inflation and a widespread slowdown in consumer spending, especially for personal devices, could still weigh heavily on the company.

Apple’s flagship device iPhone generated about $42.6 billion in revenue for the fourth quarter, which ended September 24, the company said. Analysts had estimated about $42.7 billion. Services such as music and video streaming brought in $19.2 billion. This was much lower than the estimate of around $20 billion.

Shares were down 18% this year, rising in earnings, though it outperformed most major indices. The S&P 500 is down 20% in 2022, and the tech-heavy Nasdaq Composite Index is down 31%.

The Cupertino, Calif.-based company did not provide a specific revenue forecast for the current quarter, continuing the approach it took at the start of the COVID-19 pandemic. But analysts estimate sales of about $128 billion have been made, which would be an all-time record.

Apple’s total revenue rose 8.1% to nearly $90.1 billion in the fourth quarter of the fiscal year. It beat estimates of $88.6 billion on better-than-expected growth in the Mac and Wearables business. Earnings of $1.29 per share is above the average estimate of $1.26.

Apple’s iPhone remains its biggest source of sales, and the company expected a boost from earlier releases this quarter. This period included almost nine days of sales for the iPhone 14, iPhone 14 Pro and iPhone 14 Pro Max. But the iPhone 14 Plus – a new format that has received a weak response from consumers – didn’t launch until the current quarter.

While the iPhone 14 Pro looks similar to the previous two models, new features like a 48-megapixel back camera and dynamic island interface have helped woo the buyers.

The company’s services business includes its music and TV+ streaming platforms, as well as Apple Card, iCloud storage and other digital offerings. It is seen as one of Apple’s key sales drivers, especially as the company expands into new types of services.

Earlier this week, the company increased prices for some services. Apple Music climbed from $9.99 per month to $9.99, and TV+ increased from $4.99 to $6.99 monthly. Apple marginally increased prices for its bundles of Apple One services. The increases can lead to further increases in revenue, although they also run the risk of blaming customers for rival services.

Meanwhile, iPad sales fell 13% last quarter to $7.17 billion, which didn’t even meet expectations. The tablet saw a resurgence in sales in 2020 and 2021, helping workers and students equip their home offices during the pandemic. Demand has slowed since then, and over the past year the device suffered a supply-chain glitch.

Apple launched a new iPad Air earlier this year, but it didn’t come with a new iPad Pro or entry-level model until the current quarter.

Apple generated $11.5 billion from the Mac, easily beating estimates of $9.25 billion. That product line also enjoyed a pandemic bump, fueled by the proliferation of hybrid work environments. But it also faced a slowdown, as Mac sales estimates for the June quarter were sorely missing.

What Bloomberg Intelligence Says:

Apple’s modest loss on revenue in FY 4Q, at a time when most big tech companies are struggling, shows a resilient business model.

–Anurag Rana, BI Senior Industry Analyst

Mack made a comeback in the fourth quarter, with sales hitting a record for that period. The category was buoyed by the redesigned MacBook Air and the new low-end 13-inch MacBook Pro – two of Apple’s most popular computers.

On the call, Maestri said the Mac had a redesign due to its stronger-than-usual 14-inch and 16-inch MacBook Pros in the holiday quarter of last year. They were the first high-end laptops from Apple to be built with their own processors, which Intel Corp. were replacing chips. Such shift will not be repeated during this leave period.

The company’s wearables, home and accessories segment, which includes Apple Watch, AirPods, TV set-top boxes, HomePod, Beats headphones and other accessories, also saw momentum in the last quarter. Apple made $9.65 billion from those products, beating expectations.

In September, the company launched Apple Watch Ultra and second generation AirPods Pro earbuds. A new Apple TV with a faster chip is going on sale in early November.

Apple indicated in its last quarterly report that it would be more cautious with spending, part of a wider slowdown for Silicon Valley companies. Unlike some peers, Apple has avoided mass layoffs. But it plans to cut spending and slow hiring in 2023, Bloomberg News has reported. “Obviously we’ve been deliberating in our decisions about where to invest,” chief executive Tim Cook said in July.

This story has been published without modification in text from a wire agency feed.