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Apple Inc. (NASDAQ: AAPL ) this week reported its first decline in revenue in more than three years, even as high inflation continues to erode customers’ spending power. Sales of the flagship products of the gadget giant – the iPhone – and the Mac personal computer declined, as people cut back on discretionary spending. Lately, ongoing supply chain issues in China, where the company has many production facilities, and global economic uncertainty have weighed on sales.
Intact Stock
Interestingly, Apple stock recovered quickly from the brief decline that followed the earnings announcement and posted a decent profit early Friday. It is important to note that the cause of the current decline is not specific to the company, but due to external factors such as the global economic downturn, rising prices, the war in Ukraine, and a bad exchange rate.
Read management/analyst commentary on Apple’s Q1 2023 results
While Apple has withheld its monthly guidance since the pandemic tightened the market, management is confident about the fast-growing services segment emerging as a key growth driver. Apple executives do not see a significant sales recovery in the near term because the current challenges will remain. At the end of the first quarter, the shipment of the recently launched iPhone-14 Pro and iPhone-14 Pro Max. affected by supply problems caused by the pandemic.
On the positive side, production has returned to normal levels, with manufacturing facilities now operating at pre-COVID capacity. In addition, the company has achieved an important milestone to increase the number of active devices to two billion, as part of the installed base.
Q1 is weak
iPhone sales, which account for more than half of total revenue, fell 8% in the December quarter. This was partially offset by continued growth in the Services division, which is now the second largest operating segment. Among other products, Wearables and Mac sales declined, while iPad sales rose 30%.
All five geographic segments witnessed negative growth in the first quarter and total sales at $117.2 billion, down 5% year-on-year. As a result, net income declined sharply to $30 billion or $1.88 per share. The company did not issue revenue guidance for the current quarter, citing uncertainty.
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However, Apple CFO Luca Maestri provided an update without specifying a number – “For services, we expect revenue to grow year over year while continuing to face macroeconomic issues in areas such as digital advertising and mobile games. For iPhone, we expect quarter-over-year revenue performance to accelerate relative to quarter-over-year revenue performance December 2016. For Mac and iPad, we expect revenue for both product categories to decline twice year-over-year due to comparability challenges and macroeconomic issues.
Slump technique
Reflecting a widespread slowdown in the tech sector, signaling a retreat from the COVID-fueled boom, Google parent Alphabet Inc. (NASDAQ: GOOG , GOOGL ) this week reported muted revenue growth and a decline in earnings for its most recent quarter. Elsewhere, the earnings of eCommerce titan Amazon.com, Inc. (NASDAQ: AMZN ) fell year over year despite rising profits.
AAPL traded up 4% on Friday afternoon, continuing the recovery that began at the beginning of the year. The stock has lost about 6% over the past six months.
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