Apple shares dropped in extended trading on Thursday, after the company’s disappointing holiday revenue forecast overshadowed a strong quarterly profit of $23 billion and rising iPhone sales.
For the quarter that ended September 30, iPhone sales were up 2.8 percent, contributing to total revenue of $89.50 billion, including nearly $1 billion more in services revenue than Wall Street expected.
Apple’s services segment, including Apple TV+ which recently closed a deal with global soccer superstar Lionel Messi, also saw sales rise 16 percent to $22.31 billion, compared with analyst estimates of $21.35 billion.
But the results do not include the bulk of sales from Apple’s newest iPhone 15 models, and the company’s forecast that sales for the Christmas quarter would be roughly in line with last year sent its stock slumping.
Apple shares, which have risen 37 percent so far this year, dropped 3.6 percent in after-hours trading after the company issued the forecast.
Apple shares dropped in extended trading on Thursday, after the company’s disappointing holiday revenue forecast overshadowed a strong quarterly profit. Pictured: CEO Time Cook
On a conference call with analysts, Chief Financial Officer Luca Maestri said sales for the current quarter, when Apple typically has its biggest sales of new iPhone models, will be similar to the previous year.
Wall Street was expecting a forecast for sales to rise 4.97 percent to $122.98 billion.
Apple faces potential headwinds last month after the United States International Trade Commission issued an order that would ban US imports of certain Apple Watches over an alleged patent violation.
The order would go into effect on December 26 unless it is overturned on appeal, or Apple reaches a deal with the patent holder to avert enforcement.
The Cupertino, California, company also faces an uneven economic recovery in China, a key market for Apple.
Last quarter, revenue from China dipped 2.5 percent, and CEO Tim Cook said the company’s new high-end handset models – the iPhone 15 Pro and Pro Max devices – are facing supply constraints.
‘While we believe investors should breathe a sigh of relief because sales and profits both exceeded expectations, the upside was small and we were concerned to see weak sales from China,’ DA Davidson analyst Tom Forte said.
Apple is facing tougher competition in the smartphone market this year as Huawei Technologies returns to the field with new phones powered by Chinese-made chips after being all but shut out of the market for several years by US government trade curbs.
Apple shares, which have risen 37 percent so far this year, dropped 3.6 percent in after-hours trading after the company issued the forecast
Apple’s sales in China fell to $15.08 billion from $15.47 billion in the fourth quarter a year ago.
CEO Cook said that after accounting for foreign exchange rates, Apple’s business in China grew year-over-year, driven by iPhone sales and services revenue.
‘In mainland China, we set a quarterly record for the September quarter for iPhone,’ Cook told Reuters. ‘We had four out of the top five best-selling smartphones in urban China.’
Cook said Apple was ‘working hard to manufacture more’ iPhone 15 Pro and Pro Max devices. ‘We do believe that later this quarter, we’ll reach a supply-demand balance,’ he said.
Several global trends are also playing in Apple’s favor, with forecasters predicting that the smartphone market has bottomed out and may start to recover in 2024.
In the longer term, investors are eying how Apple responds to the boom in generative artificial intelligence in which systems can follow prompts in human-like ways – an area that has attracted billions in spending by Microsoft and Alphabet’s Google.
Apple has said it is working on the technology and views it as a way to improve a wide range of products.
For now, the iPhone remains Apple’s biggest seller. Sales of the device were $43.81 billion in the fourth quarter, in line with analyst expectations of $43.81 billion, according to LSEG data.
The personal computer market is also expected to fare better in the coming year. Earlier this week, Apple rolled out new Mac machines.
Still, Mac sales slumped by a third to $7.61 billion and iPad sales declined 10 percent to $6.44 billion, compared with expectations of $8.63 billion and $6.07 billion, respectively.
Sales in Apple’s wearables segment, which includes the Apple Watch and AirPods, fell 3 percent to $9.32 billion, short of estimates of $9.43 billion, according to LSEG data.
Apple has faced several quarters of declining sales of Macs and iPads, and the fourth quarter continued that trend.