Apple Inc. posted weaker-than-expected iPhone and services sales in its latest quarter, marring an otherwise upbeat report and sparking concerns about two areas that were expected to be highlights.
The iPhone, Apple’s flagship device, generated about $42.6 billion in the fiscal fourth quarter, the company said Thursday. Analysts had estimated nearly $42.7 billion. Services — a key growth area in recent years — brought in $19.2 billion. That was well short of the almost $20 billion projection.
Though overall revenue was greater than expected, the results dashed hopes that Apple would have a blowout quarter and sidestep a broader tech slump. Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and others all delivered gloomy earnings reports in recent days, sending their shares tumbling.
With loyal customers still eager to snap up its pricey products, Apple was seen as an outlier. The company also released its latest iPhone earlier in the year than usual, giving the fourth quarter a greater portion of sales from Apple’s flagship device. But roaring inflation and a broader slowdown in consumer spending, particularly for personal devices, may be weighing on the company.
Apple’s stock slid in late trading following Thursday’s report, though it later pared some of the losses. The shares had declined 18% this year heading into the earnings — a better performance than most major indexes. The S&P 500 has lost 20% in 2022, and the tech-heavy Nasdaq Composite Index is down 31%.
The Cupertino, California-based company didn’t provide a revenue forecast for the current quarter, continuing an approach it adopted at the start of the Covid-19 pandemic. But analysts estimate sales of about $128 billion, which would be an all-time record. Apple executives are likely to give some guidance on Thursday’s earnings call with analysts.
Apple’s overall revenue grew 8.1% to about $90.1 billion in the fourth quarter, which ended Sept. 24. That beat the $88.6 billion estimate, because of better-than-expected growth in its Mac and wearables businesses.
Apple’s iPhone remains its biggest source of sales, and the company was expected to get a boost from an earlier release this quarter. The period included about nine days of sales of the iPhone 14, iPhone 14 Pro and iPhone 14 Pro Max. But the iPhone 14 Plus — a new format that has seen a tepid response from consumers — didn’t launch until the current quarter.
While the iPhone 14 Pro looks similar to the past two models, new features like a 48-megapixel back camera and the Dynamic Island interface have helped entice shoppers.
The company’s services business includes its Music and TV+ streaming platforms, as well as the Apple Card, iCloud storage and other digital offerings. It’s seen as one of Apple’s key sales drivers, especially as the company expands into new types of services.
Earlier this week, the company boosted prices for some services. Apple Music climbed to $10.99 a month from $9.99, and TV+ increased to $6.99 monthly from $4.99. Apple also modestly bumped pricing for its Apple One services bundles. The increases could further fuel revenue, though they also risk having customers defect to rival services.
The iPad, meanwhile, brought in $7.17 billion last quarter, also missing expectations. The tablet saw a sales resurgence in 2020 and 2021, helped by workers and students equipping their home offices during the pandemic. Demand has slowed since then, and the device suffered from supply-chain snags over the past year.
Sales of the iPad decreased 13% last quarter from the year-earlier period. Apple launched a new iPad Air earlier this year, but it didn’t come out with a new iPad Pro or entry-level model until the current quarter.
Apple generated $11.5 billion from the Mac, handily beating estimates of $9.25 billion. That product line also enjoyed a pandemic bump, fueled by the spread of hybrid work environments. But it suffered a slowdown as well, with Mac sales badly missing estimates in the June quarter.
The Mac bounced back in the fourth quarter, with sales marking a record for that period. The category was buoyed by a redesigned MacBook Air and new low-end 13-inch MacBook Pro — Apple’s two most popular computers.
The company’s wearables, home and accessories segment, which includes the Apple Watch, AirPods, the TV set-top box, HomePod, Beats headphones and other accessories, also saw momentum in the fourth quarter. Apple made $9.65 billion from those products, beating expectations.
In September, the company launched the Apple Watch Ultra and second-generation AirPods Pro earbuds. A new Apple TV with a faster chip is going on sale in early November.
Apple signaled in its previous quarterly report that it would be more cautious with spending, part of a broader deceleration for Silicon Valley companies. Unlike some peers, Apple has avoided mass layoffs. But it plans to cut back on expenditures in 2023 and slow hiring, Bloomberg News has reported. “Obviously we’re being deliberate in our decisions of where to invest,” Cook said in July.
