Apple’s sales drop slightly while profit is up 11%

SAN FRANCISCO: At a time when the tech industry’s biggest companies are rebounding from a post-pandemic dip, Apple is suffering through its most prolonged sales slump in more than a decade.
On Thursday, the world’s most valuable tech company said that sales fell 1%, to $89.5 billion, from last year for the three months that ended in September, bringing an end to a fiscal year in which it posted sales declines every quarter.The company reported that profits rose 11%, to $22.96 billion.
Apple’s most important business, the iPhone, rallied last month behind the release of four new devices, which boosted sales 3%, to $43.81 billion, from last year. And the company’s sales for software and services, such as Apple Music and cloud storage, jumped 16%, to $22.31 billion.
But sales sank for most of the company’s other businesses, including the Mac, iPad, the Apple Watch and AirPods. Total product sales dropped by 5%, to $67.18 billion.
The results exceeded Wall Street’s expectations for $89.34 billion in sales and $21.77 billion in profit.
Apple’s shares have declined 11% from their peak this summer and were down about 1% in after-hour trading Thursday.
Tim Cook, Apple’s CEO, faces a bevy of challenges in the year ahead. After a surge in demand for new 5G iPhones, wireless carriers are reporting a slowdown in the number of people buying new smartphones in the United States, Apple’s largest market, according to Arete Research, an investment research firm.
In China, Apple is confronting renewed competition in the luxury smartphone business from Huawei. The Chinese smartphone maker had been hampered in recent years by U.S. restrictions on its access to 5G technology and Android software, but in August it revealed a jade-green smartphone, Mate 60 Pro, that has the same capabilities as many iPhones. Its release was followed by the Chinese government directing employees of some government agencies to stop using iPhones for work.
Sales of Apple’s new flagship iPhones declined 4.5% during the final weeks of September from last year, according to Counterpoint Research, which analyzes the smartphone market. The dip was an outgrowth of the broader downturn in consumer spending in China, the firm said.
Last month, China expanded its challenge to Apple’s business by launching a regulatory review of the company’s biggest iPhone manufacturer, Foxconn of Taiwan. The manufacturer is facing a tax audit and being investigated over its compliance with land use regulations. The scrutiny comes as Terry Guo, Foxconn’s founder, runs for Taiwan’s presidency in a campaign that could boost the ruling party, which opposes closer ties with Beijing.
Cook traveled to China last month in an unannounced visit that included stops at an Apple store; a visit to the factory of Luxshare Precision, a Chinese iPhone manufacturer; and a meeting with Wang Wentao, the country’s commerce minister.
The broader tech industry has been lifted by enthusiasm for generative artificial intelligence. Last month, Microsoft reported that investments in AI were beginning to help sales of its cloud-computing business. Google’s parent company, Alphabet, which has invested heavily in AI, disappointed investors, who had hoped for a greater lift to sales. Amazon and Meta Platforms, Facebook’s parent company, also emphasized their investments in that area.
But Apple, which is known for its secrecy, has been quiet about its plans for generative AI. During a call with analysts in August, Cook said that the company was investing in generative AI but was unlikely to provide an update until it had a product to bring to market.
As it looks ahead to next year, much of the company’s focus will shift to the release of its first major new product since 2014: high-tech goggles that blend the real world with virtual reality. The $3,500 device, the Vision Pro, has the potential to provide a new revenue stream at a time when sales of its other products have slowed. Analysts project Apple will sell fewer than 500,000 units.
The company also is focused on reviving sales of its iPads and Macs. On Monday, Apple revealed new MacBook Pros and iMacs with speedier processors and encouraged customers with older Macs to upgrade. Sales of Macs declined 27%, to $29.36 billion, over the past fiscal year.