According to recent financial results from Apple, global sales of iPhones have fall and declined in nearly all markets, with the first quarter of the year seeing a more than 10% drop in demand for its smartphones. Despite this downturn, sales in Europe remained stable, contrasting with other regions. Apple’s total revenues fell by 4% to $90.8 billion, marking the largest decline in over a year. However, the company’s share price experienced a rise in after-hours trading in New York, as the financial outcomes were not as negative as anticipated.
Apple attributed these less-than-expected results partly to Covid-related supply disruptions that had previously driven unusually high sales during the same period last year. The company remains optimistic about future growth, highlighting upcoming product launches and advancements in artificial intelligence (AI) technology as key drivers that will likely bolster sales moving forward.
In the particularly crucial market of Greater China, iPhone sales saw an 8% decline. However, Apple CEO Tim Cook emphasized that sales within mainland China actually increased, expressing a positive long-term outlook for Apple in the world’s second-largest economy. This market faces growing competition from local manufacturers like Huawei, which benefits from being a homegrown brand favored by local consumers.
Gil Luria, a senior software analyst at DA Davidson, acknowledged that while Chinese brands are popular locally, the iPhone continues to hold significant advantages in terms of features, functionality, and prestige. He noted that consumers who can afford iPhones and have the choice are likely to prefer them over other brands, including in China.
The broader context for Apple includes a challenging period where the company has seen sales declines in five of the past six quarters, contrasting with a global increase in smartphone shipments, which rose 10% in the first quarter of the year according to Canalys. This marks a recovery from a previously sluggish period for the smartphone market at large.
Luria pointed out that there have been no significant improvements to the iPhone since the launch of the iPhone 15 nearly four years ago, which introduced 5G connectivity—a major upgrade that led to substantial consumer updates. He suggested that Apple’s hope is pinned on the introduction of new AI features in the forthcoming iPhone 16, anticipated to spark a significant upgrade cycle.
Apple is also navigating legal challenges in the US and Europe related to its app store fees, and an anti-monopoly lawsuit in the US concerning the payments it receives from Google for making Google the default search engine on Safari. These payments, which amounted to about $20 billion in 2022, significantly contribute to Apple’s profits.
Despite a flat pre-tax profit of $28 billion for the quarter, Apple announced plans to set aside $110 billion for share buybacks. The company’s finance chief, Luca Maestri, projected a sales increase in the low single digits for the quarter ending in June and anticipated double-digit growth in its services sector.
Angelo Zino, a senior equity analyst at CFRA Research, noted that the situation in China was holding up better than expected and mentioned upcoming events and catalysts that could potentially improve investor sentiment toward Apple.
