Apple's Revenue Downs In Two Consecutive Quarters, Despite The Increase In IPhone Sales

Tim Cook, CEO of Apple Inc., with students in Japan. (photo: Twitter @tim_dook)

JAKARTA - Apple Inc on Thursday, February 2 estimated that its revenue would fall in the second quarter in a row. But iPhone sales are likely to increase as production returns to normal in China after a COVID-related lockdown.

While giving an optimistic tone on sales of services and iPhones, Apple CEO Tim Cook said an uncertain economy is expected to cost revenue in categories such as games and digital advertising.

Overall, Apple leaders are trying to reassure investors that even though the company is hit by ups and downs in sales cycles for its flagship devices and is prone to supply chain shocks, the world's largest listed company remains stable and increasing.

Soon after some of the company's worst financial results in years, at least some investors seem to be giving Cook a gain over doubts, such as simply imposing a modest drop in stock prices.

For the recently ended quarter, Apple's gains missed Wall Street expectations for the first time since 2016, dragged by a decline in iPhone sales for the first time since 2020.

Shares fell about 2% after Financial Officer Chief Luca Maestri said iPhone sales tended to improve compared to the quarter ended December 31. But that didn't quite erase the 3.7% increase during regular trading. Amazon.com and Alphabet stocks also fell about 4% after reporting the results.

Apple's sales last year fell 5% to 117.2 billion US dollars (IDR 1,771.4 trillion) and fell in every part of the world in that quarter. Sales from each product category fell, except for service and iPad profits. Profit per share is 1.88 US dollars.

Analysts expect sales of 121.1 billion US dollars and a profit of 1.94 US dollars per share, according to IBES data from Refinitiv. In an interview, Cook told Reuters that disruptions to Apple's disruptive production in the first quarter are now over. "Production is now back where we want it to be," he said.

During the first fiscal quarter ended December 31, Apple faced a wave of challenges that saw Wall Street expect lower sales. The most important thing was supply chain pressure when the COVID lockdown at production facilities in Zhengzhou, China, slowed the production of the iPhone 14 Pro and Pro Max devices, both models at premium prices that traditionally helped push Apple's margin higher.

Cook said the lockdown in China created a double challenge where supply and demand were limited, with China's larger sales dropping 7% to 23.9 billion US dollars (Rp 361.1 trillion).

But product barriers are behind Apple now. "They still feel demand will be weak, but they have improved production, which means that if demand rises unexpectedly, they can improve to fulfill it," said Ben Bajarin of the firm analyst Creative Strategies, quoted by Reuters.

The strong US dollar also cost Apple more than half of its sales from outside America, but the effect was less than expected as the dollar weakened from last year's highest level.

Apple has warned investors that such foreign exchange issues would hamper sales by 10%, but said last Thursday that the real effect was 8%. Apple expects a 5% impact on foreign currency exchange rates in the fiscal second quarter.

"I will show that 8% are still very severe winds," Cook told Reuters. "I don't want to underestimate that. We will grow on a constant basis of currency."

On top of supply chain issues for the iPhone, Wall Street analysts expect iPhone sales to drop this year as part of a larger pattern where the iPhone 14 families released last year are selling slower after two consecutive years of strong iPhone 12 and iPhone 13 sales. Apple says iPhone sales are $65.8 billion, down 8% from the previous year and the first decline since 2020.

According to Refinitiv data, only two segments grew on Apple. The company's service segment, which includes content businesses such as Apple TV+ and software businesses such as the App Store, rose 6% to USD 20.8 billion in revenue. While iPad sales rose 30% to USD 9.4 billion, compared to analyst expectations of USD 7.8 billion.

Cook told Reuters the company now has a base of 2 billion active devices, up from 1.8 billion last year. The company now has 935 million paid subscriptions, up from 900 million in the previous quarter, and sales of the service set record records in several markets, including in China.

The company's Mac computer sales, which exploded during waves working from home during the pandemic, fell 29% year-on-year to 7.7 billion US dollars. The segment of wearable devices and accessories, which includes Apple Watch and AirPods, fell 8% to 13.5 billion US dollars.