Apple (AAPL.O) presented its holiday quarter sales forecast on Thursday, which failed to meet Wall Street’s expectations due to weak demand for iPads and wearables, causing its shares to drop approximately 3% in after-hours trading.
CEO Tim Cook reassured investors that the new iPhone 15 models were performing well in China, addressing concerns that Apple was losing market share to local competitors like Huawei.
While Apple’s overall revenue from China declined by 2.5% in the fiscal fourth quarter ending on September 30, Cook clarified that it actually grew when factoring in foreign-exchange rates.
Chief Financial Officer Luca Maestri told analysts on a conference call that the sales for the current quarter, encompassing the Christmas holidays and the launch of new iPhone models, would be similar to the previous year. Wall Street had anticipated a sales increase of 4.97% to $122.98 billion.
Apple’s shares, which had risen 37% during the year, dropped 3.4% in after-hours trading following the forecast.
Maestri also mentioned that Apple anticipates higher iPhone sales in the fiscal first quarter, despite this year’s holiday quarter having one less week of sales compared to the previous year.
While some analysts expressed surprise at Cook’s confidence in China’s future performance, given potential geopolitical challenges, Apple reported sales and profits for the fiscal fourth quarter that surpassed Wall Street expectations.
The uptick in iPhone sales and a $1 billion boost in services revenue offset significant drops in Mac and iPad sales.
Apple’s new high-end handsets, the iPhone 15 Pro and Pro Max, are currently facing supply constraints.
Apple has navigated the global smartphone slump better than many of its competitors but faces an uneven economic recovery in China, a crucial market.
Apple reported sales of approximately $89.50 billion for the most recent quarter, slightly down by 1% but surpassing analyst estimates. Net income rose by around 11%, and profit per share reached $1.46, exceeding analyst expectations of $1.39 per share.
Apple faces stiffer competition in the smartphone market this year with Huawei’s return and its new phones powered by Chinese-made chips.
Sales in China fell to $15.08 billion, down from $15.47 billion in the fourth quarter of the previous year. Cook explained that, after accounting for foreign-exchange rates, Apple’s business in China actually grew YoY, driven by iPhone sales and services revenue.
For now, the iPhone remains Apple’s top-selling product, with sales reaching $43.81 billion in the fourth quarter.
Apple’s personal computer market is also expected to improve with the launch of new Mac machines, although Mac sales declined by a third to $7.61 billion, and iPad sales fell by 10% to $6.44 billion, missing expectations.
Sales in Apple’s wearables segment, including the Apple Watch and AirPods, also dropped by 3% to $9.32 billion, falling short of estimates.
However, Apple’s services segment, which includes Apple TV+ and recently secured a deal with soccer superstar Lionel Messi, reported a 16% rise in sales to $22.31 billion, surpassing analyst estimates.