Apple quarterly profit, revenue top Wall Street targets but China lags
The iPhone maker reported it now has an installed base of 2.2 billion globally
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Apple on Thursday reported sales and profit that beat Wall Street estimates, powered by growth in its iPhone business. But China sales missed analysts' targets.
Apple shares were down 1.7% in after-hours trading.
The 2% rise in overall fiscal first-quarter sales for the company ended four straight quarters of sales declines on the strength of its iPhone 15 lineup, which includes devices capable of capturing three-dimensional video for the Vision Pro headset being released this week. Apple's total installed base of devices hit 2.2 billion, up from 2 billion a year ago.
The Apple Inc. logo at one of the company's stores in Sydney, Australia, on Friday, March 18, 2022. The debut of Apple's latest iPhone brings a change to the way its U.S. customers can purchase the device, a move toward cutting wireless carriers out (Photographer: Brent Lewin/Bloomberg via Getty Images / Getty Images)
"We did feel good about the plus 6% (revenue growth) for iPhone," Apple Chief Executive Tim Cook told Reuters in an interview. "We had particularly strong double-digit growth on iPhone in emerging markets outside of China. The iPhone is doing well in those markets."
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He added: "China is the most competitive smartphone market in the world, and that hasn't changed."
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, according to data from LSEG.
Sales of iPhones hit $69.70 billion, growing 6% to beat analyst expectations of $67.82 billion, according to LSEG data.
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"The overall strength of iPhone 15 sales clearly reflected more pent-up demand for smartphones than expected, but the big miss in China is concerning as it could be the start of a longer downward trend there," said Bob O'Donnell, an analyst at TECHnalysis Research.
Microsoft in January eclipsed Apple as the world's most valuable company, with investors viewing Apple as lagging in the artificial-intelligence race between Wall Street's tech heavyweights. Apple's stock has dropped more than 3% in 2024, compared with the S&P 500's 2% increase.
IPhones are displayed in the Apple Store on Feb. 3, 2023, in New York City. (Leonardo Munoz/VIEWpress via Getty Images / Getty Images)
Apple has said it is researching generative AI but has instead focused on its Vision Pro headset, which analysts do not expect to bring meaningful revenue for several years.
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In the shorter term, analysts are increasingly worrying about sales of Apple's signature device in China, whose economy is navigating the burst of a real estate bubble. The iPhone also faces increasing competition in China and has fallen out of favor in government offices.
Apple said sales in China were $20.82 billion, missing analyst estimates of $23.53 billion, according to LSEG data.
Cook told Reuters that, when accounting for currency exchange rates, iPhone sales in mainland China were down "mid-single digits" in the quarter but said the company's installed base of iPhones in China is at an all-time high.
Counterpoint Research reported China iPhone unit shipments fell during the quarter, with Chinese consumers looking to novel folding phones and homegrown rival Huawei, which re-entered the market with a flagship phone powered by a Chinese-made chip.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAPL | APPLE INC. | 239.59 | +2.26 | +0.95% |
In the rest of Asia beyond China and Japan, Apple's sales hit $10.16 billion, above analyst estimates of $9.75 billion, according to LSEG data. Cook said that iPhone sales hit an all-time high in South Korea, home to Apple's longtime rival Samsung Electronics.
Investors will be listening closely for the Cupertino, California-based company's forecast for the fiscal second quarter on a conference call at 5 p.m. EST (2200 GMT).
The biggest growth area for Apple during its fiscal first quarter was its services business, which includes the Apple TV+ service as well as music, iCloud storage and the App Store, and which rose 11% to $23.12 billion in sales. The results were slightly below analyst expectations of $23.35 billion, according to LSEG data.
he Dutch antitrust watchdog fined Apple 5 million euros ($5.7 million) on Monday, the fifth such penalty in successive weeks in a row over access to non-Apple payment methods for subscriptions to dating apps. REUTERS/Joshua Roberts/File Photo (REUTERS/Joshua Roberts/File Photo / Reuters Photos)
But Apple's App Store faces a challenge in Europe, where a new law that takes effect in March will allow developers to skip paying commissions to Apple and place alternative app stores on the iPhone.
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Apple's first-quarter Mac sales were up slightly to $7.78 billion, in line with analyst expectations of $7.73 billion, according to LSEG data. Sales of iPads were down 25% to $7.02 billion, missing expectations of $7.33 billion, according to LSEG data.
Apple's wearables segment, which includes its AirPods and Apple Watch sales, fell to $11.95 billion after company executives had warned of weak demand. The results were just above expectations of $11.56 billion, according to LSEG data.
Several Apple Watch models have been at the center of a legal dispute with medical device maker Masimo and were briefly pulled from shelves before Apple removed a blood-oxygen monitoring features to comply with legal rulings and keep selling the devices.