Apple Sluggishness to Persist This Quarter as Slump Takes Toll

Apple Inc. posted its third straight quarter of declining sales and predicted a similar performance in the current period, hurt by an industrywide slump that has sapped demand for phones, computers and tablets.

(Bloomberg) — Apple Inc. posted its third straight quarter of declining sales and predicted a similar performance in the current period, hurt by an industrywide slump that has sapped demand for phones, computers and tablets.

After the company reported a revenue decline of 1.4% in the fiscal third quarter, Chief Financial Officer Luca Maestri said on a conference call that Apple’s performance would be similar this period. An additional drop would mark the longest streak of declines in two decades — a startling slowdown for the world’s most valuable company.

“The environment is challenging,” Daniel Flax, a senior research analyst at Neuberger Berman, said in an interview with Scarlet Fu on Bloomberg Television. “Consumers face pressure from general interest rates, higher inflation. There are a lot of cross currents that Apple, like a lot of other companies, cannot outrun.”

Though Apple’s overall revenue of $81.8 billion came in just above Wall Street estimates last quarter — helped by record-setting services sales — iPhone demand was weaker than predicted. That jarred investors, who sent the shares down as much as 3.2% in extended trading. Apple had been up 47% in 2023 through the close, part of a broader tech-fueled rally this year.

The results showed that Apple’s much-prized iPhone hasn’t evaded a downturn that has rattled Apple’s rivals and partners. Qualcomm Inc., a mobile-device chipmaker and iPhone supplier, had sparked fears about demand with its earnings Wednesday, sending its shares plunging ahead of Apple’s report.

It didn’t help that Apple had a dearth of new products last quarter — beyond marginal updates to its high-end desktop computers and a larger MacBook Air. The current quarter will be a different picture, with the new iPhone 15 and Apple Watches set to be unveiled during the period.

Sales of the iPhone, Apple’s biggest moneymaker, slipped 2.4% to $39.7 billion last quarter, compared with a $39.8 billion estimate.

Demand for the iPhone 14 model are tapering off as the company prepares to unveil the next version, which promises to be the most significant iPhone upgrade in three years. New iPhones typically debut in September, a few weeks before the fourth quarter ends. That means the bulk of sales comes in the following period, Apple’s fiscal first quarter, which is invariably its most lucrative time of year.

The iPhone 15 Pro models will add new features like a titanium frame, thinner borders around the screen and a faster processor. But given the sluggish state of consumer spending, it may still be hard to entice some consumers to upgrade.

Apple has informed suppliers that it expects shipments of the device to remain flat with the year before through the balance of 2023, at about 85 million units. Other phone makers, including Samsung Electronics Co., have also seen sales of their devices slow or remain flat.

The iPad, meanwhile, suffered a sales decline of 20% last quarter. That business generated $5.79 billion, versus calls for about $6.33 billion. Apple hasn’t updated any of its tablets since last year and won’t make any significant changes to the lineup until 2024. The company is preparing to announce a revamped iPad Pro with a superior display in the first half of that year, Bloomberg has reported.

The Mac is showing signs of recovering from a deep downturn. Though its sales fell 7.3% to $6.84 billion, that topped an average estimate of $6.37 billion. The only major new products that Apple launched in the third quarter were Macs: The new larger MacBook Air and pro-focused desktop machines were introduced in June.

The wearables, home and accessories segment, which includes the Apple Watch and AirPods, brought in $8.28 billion. That missed estimates of $8.38 billion. Apple is preparing to release new watches in September with better performance and new colors — though not much in the way of new features. Last fall, the company launched three new models, including a high-end Ultra version, that helped boost the average selling price of the devices.

Services revenue was the bright spot, climbing 8.2% to $21.2 billion. That topped estimates of $20.8 billion. 

The growth was “driven by over 1 billion paid subscriptions,” Chief Executive Officer Tim Cook said in the statement.

–With assistance from Tom Giles and Ian King.

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