Apple iPhone shipments rebounded from supply chain disruptions in the holiday period, though revenue continued to decline year-over-year for the second consecutive quarter due to what it called a “tougher” economic environment and currency headwinds.
Chief Financial Officer Luca Maestri said Apple saw a “significant acceleration in iPhone revenue from December to March”. Device sales, which account for 54 percent of total revenue, rose 2 percent in the first quarter to $51.3 billion, beating estimates of $48.9 billion.
The rise in sales came as a relief to investors wondering what demand would look like after a Covid-19 outbreak at Foxconn’s factory known as “iPhone City” derailed production in November.
CEO Tim Cook said that Apple succeeded in “this awful show . . . between the pandemic, chip shortages and macroeconomic factors”. “The supply chain has been incredibly resilient and we feel very good about where we are and what our plans are,” he added.
Overall, total revenue fell 2.5 percent year-on-year to $94.8 billion in the three months ended at the end of March, driven by a sharp decline in sales of Mac computers and iPads, while net profit fell 3.4 percent to 24.2 percent. Billion dollar. Analysts expected revenue of $93 billion and $22.6 billion in net profit, according to Refinitiv.
Maestri blamed “significant foreign exchange headwinds,” saying it accounted for 5.4 percentage points of damage to revenue. In constant currency, he said, revenue would have grown by 3 percent.
Regionally, excluding China and Japan, Asia was a bright spot, with revenue there jumping 15.3 percent to $8.1 billion. Cook said the group saw record revenues in Mexico, Indonesia, Turkey and the Philippines.
Apple has also made a big push into India, where it recently opened its first two stores and Cook met the country’s prime minister. Commenting on the trip, Cook said, “There are a lot of people who are middle-class, and I really feel that India is at a turning point.”
However, sales in the most recent quarter were down about 3 percent in China and 8 percent in the United States. Maestri told investors that overall revenue growth for the current quarter will be “similar to the March quarter.” Which means sales will contract slightly again compared to the previous year.
Apple is increasingly focusing on its services division as the engine of revenue growth. It now has 975 million global paying subscribers for a range of digital offerings including music, movies and iCloud storage, nearly double the number it was three years ago. That was an increase of 150 million in the past 12 months, according to Maestri, who called Apple the “economic engine” for the long term.
Revenue in the division, which also includes App Store payments and licensing fees, rose 5.5 percent to $20.1 billion, in line with expectations but slower than the 17 per gain reported a year ago. The division accounts for 22 percent of Apple’s revenue. Their margins were 71 percent against 36.7 percent for devices.
Aside from the iPhone, sales of other Apple devices have been softer than they were a year ago. Mac sales fell 31 percent, worse than the 25 percent decline analysts had expected amid broader weakness in the PC market. iPad sales also fell 13 percent, as expected, while the wearables division, which includes AirPods and Apple Watch, fell 1 percent.
Those declines were “a harbinger of the uphill climb most consumer brands will face in the coming months as consumers grow increasingly anxious about their overcapacity,” said Dipanjan Chatterjee, an analyst at Forrester.
“The pandemic spending euphoria is over,” he added.
Cook was asked about Apple’s efforts in artificial intelligence, an area of growth in which some observers have expressed concern that it lags behind the general efforts of Microsoft and Alphabet.
He said that AI was “huge” for Apple’s future and that the company was making “tremendous progress integrating AI and machine learning throughout our ecosystem”.
“I think it’s very important to be thoughtful and thoughtful about how you deal with these things. And there are a number of issues that need to be sorted out, and they’re being talked about in a number of different places,” Cook said.
Apple announced that its board of directors has authorized spending of $90 billion on share buybacks in the next 12 months, as expected. Apple has repurchased nearly $600 billion in stock over the past decade, according to S&P Global Market Intelligence.
Shares of the company, which are already up about a third this year, rose 2.4 percent in after-hours trading.