Apple posted a decline in quarterly revenues for the first time in three-and-a-half years after “significant” supply chain disruptions in China delayed deliveries of iPhones during the important holiday period.
The worse than expected performance highlighted Apple’s dependence on China for manufacturing and came after shipments of its high-end iPhones were hit by an outbreak of Covid-19 at an assembly hub run by partner Foxconn in Zhengzhou.
Tim Cook, chief executive, signalled that revenues in the first three months of this year would also miss the prior year’s, even though iPhone sales were expected to “accelerate”, meaning sales of Apple’s other products would be hard hit by lower demand.
Apple posted total revenues of $117.2bn for the latest quarter, a fall of 5.5 per cent compared to the same period of 2021 and below analyst forecasts for $121.1bn. Net profits of $30bn were 13.4 per cent lower than last time and also slightly missed expectations.
“In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter,” Cook said, adding that sales of Macs and iPads would probably fall by double digits in part because of a “challenging” economic environment.
Shares of Apple fell by more than 3 per cent in after-hours trading.
Apple’s revenue shortfall came as Amazon and Alphabet pointed to further weakening in some of their core markets in the latest quarter. Taken together, the earnings reports from three of the world’s biggest companies provided a note of caution for investors a day after better than expected results from Facebook owner Meta helped fuel a sharp rally in technology stocks.
Revenue growth slowed and earnings stalled at Amazon Web Services, the ecommerce group’s biggest moneymaker, as big customers looked for ways to save money on their cloud spending.
Meanwhile, Alphabet’s revenue came in below expectations as its advertising revenue fell for only the second time in its history, partly because of the strength of the US dollar and comparisons with soaring growth a year before.
Cook said that the China supply chain challenges affecting iPhone shipments had been sorted out, adding: “We’re now at the point where production is what we need it to be. And so the problem is behind us.”
But he offered a more gloomy assessment of sales of Apple’s Mac computers, warning that the while the company was “well positioned” in the PC market “it will be a little rough in the short-term”.
Despite the lacklustre earnings and outlook, Apple did not announce any job cuts or a cost-cutting programme, marking it out as the only large tech company to avoid mass redundancies at a time when others are making large headcount reductions.
Apple did not provide any forward guidance, something it has not done for three years owning to what it describes as pandemic uncertainty.
In an interview with the Financial Times, finance chief Luca Maestri said that Apple’s “active installed base” — the number of its devices in use — had crossed the 2bn threshold, up from 1.8bn a year ago. “This is twice the number of active devices that we had just seven years ago,” he said.
Maestri said that were it not for the supply chain problems in China, sales of iPhones would have grown in the quarter.
Apple had warned three months ago that a strong dollar could shave up to 10 percentage points off revenue, equal to a roughly $12bn hit. The actual impact was about 8 percentage points.
“Eight per cent is a lot of revenue that we lost to the strength of the dollar, but it’s better than it was three months ago because the dollar has weakened a bit,” Maestri said.
Additional reporting by Richard Waters