For those who came in late, Apple is depending on iPhone users to buy the product to save it from having to invent something new. Lately though that cash cow is dying -- particularly in China and according to yesterday's results in the rest of the world too.
While Jobs’ Mob posted a 4 per cent rise in overall revenue for its first fiscal quarter, it fell short of what the cocaine nose jobs of Wall Street’s expectations for iPhone sales and recorded an 11.1 per cent decline in sales in China.
For the quarter ending 28 December, Apple reported earnings per share of $2.40, surpassing the $2.35 estimated by analysts. Revenue reached $124.3 billion, slightly above the $124.12 billion expected. IPhone sales fell below forecasts at $69.14 billion, compared with an anticipated $71.03 billion.
Meanwhile, Mac and iPad revenue exceeded expectations, growing by 15 per cent year-on-year to $8.99 billion and $8.09 billion, respectively. Apple’s Services division, a key profit driver, saw a 14 per cent increase in revenue to $26.34 billion.
Apple forecasted revenue growth of “low to mid-single digits” for the March quarter, with its Services segment expected to grow in the “low double digits.” The company also noted that the strength of the US dollar would weigh on sales, reducing overall revenue by approximately 2.5 per cent.
Apple’s iPhone sales declined year over year, marking the first full quarter of iPhone 16 availability. The shortfall was the company’s largest since fiscal Q1 2023, when production issues in China hindered iPhone 14 supply.
Sales in Greater China, which includes the mainland, Hong Kong, and Taiwan, dropped by 11.1 per cent to $18.51 billion, the largest decline in the region since the same quarter last year, when sales fell by 12.9 per cent.
Apple CEO Tim Cook attributed the decline to three factors: changes in “channel inventory,” the absence of Apple Intelligence in China, and a national subsidy introduced after the quarter’s end, which could boost future sales.
“If you look at the negative 11, half of the decline is due to a change in channel inventory, and so the operational performance is better,” Cook claimed.
Cook noted that iPhone sales performed better in markets where Apple Intelligence had been introduced. The AI-powered software, launched in the December quarter, is currently only available in select English-speaking countries. In April, Apple plans to expand support to additional languages, including simplified Chinese.
However, Apple Intelligence has a poor reputation in comparison with other AI offerings and while it might have encouraged some to upgrade, those who did were disappointed.
Apple reported a record-high gross margin of 46.9 per cent, surpassing the previous high of 46.6 per cent recorded in March 2024. The company expects gross margins for the March quarter to range between 46.5 and 47.5 per cent.
The Mac and iPad divisions showed strong growth, reversing last year’s holiday quarter declines. Mac revenue rose 15 per cent to $8.99 billion, marking its best growth since Q4 2022.
iPad sales also grew by 15 per cent, reaching $8.09 billion. The company launched new Mac models in October, including the iMac, Mac Mini, and MacBook Pro, as well as a new iPad Mini.
Apple’s wearables category, which includes the Apple Watch, AirPods, Beats, and Vision Pro, saw a two per cent revenue decline to $11.75 billion.
Apple’s Services division, which includes subscriptions, warranties, and licensing, remains a major driver of profitability. The company reported $26.34 billion in revenue from the segment, with Cook revealing that Apple now has more than one billion subscriptions across its ecosystem.
The company ended the quarter with $36.33 billion in net income, a 7.1 per cent increase from the $33.92 billion recorded in the same period last year. Apple also announced a dividend of 25 cents per share and spent $30 billion on share buybacks and dividends in the quarter.
The company’s active installed base of devices grew to 2.35 billion, up from 2.2 billion a year ago, reinforcing its position as a dominant player in consumer technology.
