Apple recorded a new decline in its revenue (-1.4%), the third in a row, during the third quarter of its staggered fiscal year, marked by a slowdown in iPhone sales, the group announced on Thursday.
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Apple Revenue Declines on Weakening iPhone Demand
Net income and quarterly revenues amounted to $19.9 billion (+2.3%) and $81.8 billion, respectively, Apple said in a statement, performances that were above analysts’ expectations.
The engine of the Apple group for more than a decade, the iPhone suffered this quarter, with sales falling (-2.4%) more sharply than the market had anticipated.
Apple Services Compensated Somewhat
This drop was partially offset by the Apple services sector, which includes the App Store, Apple Music streaming platform, and remote data storage (cloud) services.
This branch of the Cupertino (California) group now accounts for more than a quarter (26%) of the revenue Apple generates, which was originally entirely focused on its computer and connected devices, from the Apple II to the iPhone.
The American tech giant now has over one billion subscriptions to its various services, its CEO, Tim Cook, said in the statement, an increase of 150 million over the last 12 months.
Results Highlight a Strategic Shift, Says Analyst
“Apple’s results illustrate the strategic shift towards services, which are becoming an essential element,” commented Jeremy Goldman, an analyst at Insider Intelligence, noting that this activity was “significantly more profitable than the physical products on which it built its reputation.”
Another growing segment for Apple is connected products, with growth reaching 2.4% year-on-year.
On the other hand, Mac sales (-7%) and iPad sales (-20%) have declined.
Chinese Sales Accelerating for Apple Despite Europe, US Declining
Geographically, Apple saw its sales in China accelerate by 7.9% year-on-year, while they had contracted in the previous quarter.
But revenue declined in the rest of Asia and the United States, while Europe fared well.
“We have declined in the United States because the smartphone market has been shrinking for several quarters,” explained CFO Luca Maestri during the press conference announcing the results.
Long Device Lives Contributing to Sales Decline
“It is becoming increasingly difficult to encourage customers to replace their devices as frequently” as in the past, given their price and a less favorable economic environment, advanced Jeremy Goldman of Insider Intelligence.
The CFO stated that the group expects, in the fourth quarter (from early July to early October), results “similar” to those of the previous three months.
“We expect iPhone and services to accelerate” during the quarter, announced Luca Maestri, while Mac and iPad are expected to see a double-digit decline.
Mac and iPad sales should suffer from an unfavorable comparison effect, as in the fourth fiscal quarter of 2022, the group was able to catch up on production delays related to site closures in the spring due to coronavirus cases.
Apple Stock Falls 2% on News
In electronic trading after the close of the New York Stock Exchange, Apple’s stock was down more than 2%.
Apple saw its gross margin rate increase significantly, to 44.5% from 43.2%, and expects it to be between 44 and 45% in the current quarter, a historically high level, highlighted Luca Maestri.
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First published in La Libre. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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