Apple’s Sales Forecast for Holiday Quarter Falls Short of Wall Street Expectations
Apple has provided a sales forecast for the upcoming holiday quarter that has failed to meet Wall Street’s expectations. As a result, the company’s shares dropped in after-hours trading. During a conference call with analysts, Apple’s Chief Financial Officer, Luca Maestri, stated that sales for the current quarter, which is traditionally the period when Apple experiences its highest sales due to the release of new iPhone models, will be similar to the previous year. However, Wall Street had anticipated a forecast for sales to increase by 4.97% to $122.98 billion.
Following the announcement of the forecast, Apple’s shares, which have risen by 37% this year, experienced a decline of 3.6% in late trading. Earlier in the day, Apple reported that its quarterly sales and profit had surpassed Wall Street’s expectations. This was attributed to an increase in iPhone sales and a $1 billion boost to services revenue, which offset significant drops in Mac and iPad sales.
However, Apple faced a 2.5% decrease in revenue from China, and CEO Tim Cook noted that the company’s new high-end handset models, the iPhone 15 Pro and Pro Max devices, are encountering supply constraints. Despite Apple’s ability to navigate the global smartphone slump better than its competitors, the company faces an uneven economic recovery in China, a crucial market for Apple.
Analyst Tom Forte from DA Davidson expressed concern over the weak sales in China despite the fact that sales and profits exceeded expectations. Apple reported that sales for the fiscal fourth quarter ending on September 30 fell by approximately 1% to $89.50 billion, surpassing analyst estimates of $89.28 billion. The company’s net income rose by approximately 11%, and its profit per share of $1.46 exceeded analyst expectations of $1.39 per share.
Apple is currently facing tougher competition in the smartphone market as Huawei Technologies re-enters the field with new phones powered by Chinese-made chips. This comes after being largely excluded from the market for several years due to U.S. government trade restrictions.
Apple’s sales in China declined from $15.47 billion to $15.08 billion in the fourth quarter compared to the previous year. However, when accounting for foreign exchange rates, Cook stated that Apple’s business in China experienced year-over-year growth, driven by iPhone sales and services revenue. Cook also mentioned that Apple is working hard to manufacture more iPhone 15 Pro and Pro Max devices, with expectations of reaching a supply-demand balance later this quarter.
Furthermore, forecasters predict that the smartphone market has reached its lowest point and may begin to recover in 2024, which bodes well for Apple. Additionally, investors are keen to see how Apple responds to the boom in generative artificial intelligence, an area that has attracted significant investment from Microsoft and Alphabet’s Google. Apple has acknowledged that it is working on this technology, seeing it as a way to enhance a variety of products.
Despite these factors, the iPhone remains Apple’s top-selling product, with sales totaling $43.81 billion in the fourth quarter, in line with analyst expectations. The personal computer market is also expected to fare better in the upcoming year, as Apple recently unveiled new Mac machines. However, Mac sales declined by a third to $7.61 billion, and iPad sales dropped by 10% to $6.44 billion, falling short of expectations. Apple’s wearables segment, which includes the Apple Watch and AirPods, experienced a 3% decrease in sales to $9.32 billion, slightly lower than estimates.
Apple has faced several quarters of declining Mac and iPad sales, and this trend continued in the fourth quarter. Conversely, sales in Apple’s services segment, which includes Apple TV+ and recently closed a deal with soccer superstar Lionel Messi, increased by 16% to $22.31 billion, surpassing analyst estimates of $21.35 billion.
