Apple (AAPL.O), opens new tab on Thursday forecast a drop in iPhone sales and targeted overall revenue $6 billion below Wall Street expectations as its China business took a hit.
This overshadowed overall fiscal first-quarter sales and profit that beat analysts’ targets, powered by iPhone growth, sending Apple shares down 3% in after-hours trade.
The results confirmed some analysts’ concerns that the company’s signature product is losing ground in the key Asian market where consumers are buying foldable phones and phones from Huawei, powered by a China-made chip.
“China is the most competitive smartphone market in the world, and that hasn’t changed,” Apple CEO Tim Cook told Reuters in an interview. He said iPhone sales there were down “mid-single digits” in the December quarter, when accounting for currency exchange rates.
“In China, Apple is facing more competitive challenges not only because of Huawei but also because of foldables, which is a very popular and fast-growing segment in China – and as we all know, Apple does not have a foldable device – yet,” said IDC analyst Nabila Popal.
Apple said sales in China in the December quarter were $20.82 billion, missing analyst estimates of $23.53 billion, according to LSEG data.
Revenue in the current quarter will be at least $5 billion less than a year ago, when the company sold iPhones rapidly to replenish inventories drawn down by COVID-related factory shutdowns, Apple Chief Financial Officer Luca Maestri told analysts on a conference call.
Maestri’s comments implied a revenue forecast of about $90 billion and iPhone sales of around $46 billion for the fiscal second quarter that ends in March. Wall Street expected nearly $96 billion in revenue and iPhone sales of $50 billion. They were $51 billion in the 2023 quarter.
That would make it the company’s worst fiscal second quarter of iPhone sales since widespread COVID lockdowns in March 2020.
“The drag would be China – and it has everything to do with their seasonality, and the elongated replacement cycle,” said Ben Bajarin, CEO of research firm Creative Strategies.
“Regardless of what happens, (a drop in) year-over-year iPhone sales would be more of a concern than a quarter.”
For its fiscal first quarter ended Dec. 30, Apple reported sales of $119.58 billion and profit of $2.18 per share, both above analyst expectations of $117.91 billion and $2.10 per share.