Apple’s iPhone sales have declined by 10%, but the company’s services business is growing.
Apple just released its Q1/2024 earnings results on the morning of May 3rd, just ahead of the new iPad launch event. These numbers paint a rather bleak picture for the Cupertino company, The Verge notes.
Revenue from iPhones, iPads, Apple Watches all decline
Specifically, the Q1/2024 earnings report shows that the company’s sales have decreased by 4%, to $90.8 billion in the first 3 months of 2024. Revenue from iPhones, iPads and wearable devices like the Apple Watch declined compared to the same period last year, while software and services sales increased. Profits fell 2% to $23.64 billion, marking Apple’s first quarterly decline in a year.
Of these, iPad revenue has decreased significantly (17% compared to the same period last year). At the same time, iPhone sales also fell (down 10%), while the company’s services business remains a bright spot with a 14% increase from the previous quarter.
Apple released its Vision Pro headset this quarter, but CEO Tim Cook did not provide any specific details about the product line during the earnings call. “This quarter, we were excited to introduce Vision Pro and show the world the potential of spatial computing,” he said in a press release.
This is also the last earnings report before Apple’s WWDC conference in June. At the event, the Cupertino company is expected to announce new features for AI synthetic software integrated into iOS, macOS, iPadOS and other platforms.
“We believe in the power of AI to change everything and its promise. At the same time, we also believe that we have the advantages to make a difference in this new era,” Cook said at the earnings call.
According to the New York Times, Apple’s most worrying challenge is in China, the world’s second largest smartphone market. This is where the company’s sales have recorded an 8% decline.
The popularity of the iPhone in the populous country has waned since Huawei – a company restricted by the Trump administration from cooperating with US tech companies – launched its new 5G smartphone last year. According to analyst Counterpoint, in the previous quarter, Apple’s smartphone market share in China declined by 4%.
Apple’s revenue shows a quarter of operations in contrast to the strong performance of other big tech companies, the New York Times noted. Recently, Amazon reported a threefold increase in quarterly profits, while Microsoft also increased quarterly revenue from cloud computing by 1/3 and Alphabet, Google’s parent company, announced it would pay dividends to shareholders for the first time in history.
Sales of these corporations are growing rapidly in part due to investment in artificial intelligence – a technology that Apple has yet to integrate into its products. Investors expect this to change in June when Apple holds WWDC and unveils its latest software.
What is making Apple remain confident?
“Top tech stocks are going through a volatile period. Apple needs a win to turn things around, by integrating AI across devices. So the question is: What is their plan going forward?” said Scott Aceychek, CEO of REX Shares.
But the good news for Apple is that its stock rose 3.5% due to better-than-Wall Street expectations for quarterly revenue and earnings. During the earnings call, the Cupertino company also said it would buy back $110 billion in stock and reaffirmed that sales are on track to grow in the current quarter.
Apple’s business continues to grow thanks to selling apps and services to customers. With 2.2 billion devices in use worldwide, the giant has sold over 1 billion subscriptions for everything from dating apps like Tinder to its own services like Apple Music. Software and services sales increased 14% to $23.9 billion in the previous quarter.
Thomas Husson, Vice President of analyst firm Forrester, said: “In the long term, Apple’s shift to a services business model is an effective way to compensate for the company’s reliance on iPhone sales.”
Previously, Apple beat Samsung at the end of last year to become the world’s largest smartphone provider, accounting for about 20% of global market share. However, Apple’s phone sales have declined in the first quarter as Chinese rivals like Huawei gain ground. Samsung also regained the lead in the early months of 2024.
In the Q&A portion of the meeting, Cook and CFO Luca Maestri received many questions about the company’s performance in China. Demand is waning, but the earnings report shows the situation is less dire than many investors had feared.
Apple’s reliance on China
Apple’s reliance on China is a major concern for investors. The company’s sales in the country have been declining, and the Chinese economy is slowing down. This could put further pressure on Apple’s profits in the coming quarters.
The future of Apple
Despite the challenges, Apple remains a strong company with a bright future. The company has a loyal customer base, a strong track record of innovation, and a growing services business. Apple is also well-positioned to benefit from the growth of the 5G market.
Investors will be watching closely to see how Apple responds to the challenges it faces. If the company can continue to innovate and execute on its plans, it is well-positioned for long-term success.
Here are some additional points to consider:
Apple is still the world’s most valuable company, with a market capitalization of over $2 trillion.
The company has a strong balance sheet and plenty of cash on hand.
Apple is investing heavily in research and development, which could lead to new products and services that drive future growth.
Overall, Apple is a complex company with a lot of moving parts. The company faces some challenges, but it also has a lot of strengths. Investors will need to weigh the risks and rewards carefully before making a decision about whether or not to invest in Apple.
