Apple Inc., in its latest financial forecast, anticipates a sales slump that could stretch into the next quarter. Despite surpassing Wall Street’s profit and sales expectations in Q3, the tech giant’s shares fell by roughly 2% due to this prediction. This could mark the fourth consecutive quarter of declining sales for the corporation.
Although robust services bolstered Q3 profits, subpar iPhone sales were a letdown for investors. Although the management anticipates improving iPhone sales in Q4, specifics remain undisclosed.
Company Struggles Amid Mature Market and Awaited Product Release
Apple finds itself navigating a tricky situation. The iPhone, an entrenched product, fights for market share against Android competitors in a mature marketplace. Simultaneously, Apple’s newly announced Vision Pro mixed-reality headset, unveiled in June, has not yet reached consumers.
The tech giant’s fiscal Q3 sales, which ended on July 1, fell 1.4% to $81.8 billion. Despite this, earnings per share increased by 5% to $1.26. These figures exceeded analysts’ expectations, as per IBES data from Refinitiv. Declining iPhone sales were offset by a surge in the services segment, including Apple TV+ and a sales growth of 8% in China.
Predictions for Q4 Fall Below Analyst Expectations
Apple CFO Luca Maestri projects a similar year-over-year revenue performance for the company’s fiscal Q4 as the drop reported on Thursday. This projection is below the anticipated Q4 sales of $90.19 billion, as per Refinitiv data.
Analysts express concerns over the timeline for volume increases and the growth trajectory for iPhone sales. However, Apple’s estimated gross profit margin for the September quarter is 44% to 45%, exceeding analyst expectations of 43.4%. Despite growth in the service segment, the company anticipates iPad and Mac sales to fall by “double digits.”
Ramp up in Research & Development Expenditure
Apple’s R&D expenditure hit $22.61 billion for the fiscal year so far, which is roughly $3.12 billion higher than the same period in the previous year. The increase is partly attributed to efforts in generative AI, a field-driving expenditure at many large tech companies. CEO Tim Cook emphasized Apple’s continued commitment to investing and innovating in AI to enhance product offerings and enrich users’ lives.
Apple’s Chinese Market Strength
Apple seems to have outperformed China, which has experienced its weakest smartphone market in almost a decade. Despite an 8% decline in overall smartphone sales in Q2, Apple’s iPhone sales in China grew by “double digits.” This helped push sales in the greater China region to $15.76 billion, up from $14.60 billion in the same quarter last year.
Although iPhone sales of $39.67 billion fell short of analysts’ expectations, Cook highlighted that the iPhone’s installed base reached a new high. The services segment, including Apple TV+, brought in $21.21 billion in revenue, surpassing estimates. The wearables business generated $8.28 billion, while Mac and iPad sales were $6.84 billion and $5.79 billion, respectively.
Analysts are closely monitoring future announcements related to Vision Pro or AI that could further expand Apple’s business model.
*Additional news input was taken from Reuters
