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Apple Predicts Another Revenue Fall And Declares Iphone Manufacturing Issues Have Been Resolved

Apple Predicts Another Revenue Fall And Declares Iphone Manufacturing Issues Have Been Resolved
Apple Inc forecasted on Thursday that revenue would fall for the second quarter in a row, but that iPhone sales would likely improve as production in China returned to normal following COVID-related shutdowns.
While CEO Tim Cook expressed optimism about service and iPhone sales, he also stated that an uncertain economy is expected to hurt industries such as gaming and digital advertising.
Overall, Apple's executives attempted to reassure investors that, despite being buffeted by up-and-down sales cycles for its flagship device and vulnerable to supply chain shocks, the world's largest publicly traded company is still on the rise, albeit at a slower pace.
And, despite some of the company's worst financial results in years, at least some investors appeared to give Cook the benefit of the doubt, imposing only minor share price declines.
Apple's profits fell short of Wall Street expectations for the first time since 2016, dragged down by a drop in iPhone sales for the first time since 2020.
The stock fell about 2% after Chief Financial Officer Luca Maestri stated that iPhone sales were likely to improve over the previous quarter ended Dec. 31. This did not quite cancel out a 3.7% gain during regular trading. and Alphabet both dropped about 4% after reporting earnings. They had also benefited from regular trade.
Apple's sales fell 5% to $117.2 billion in the third quarter, with declines in every region of the world. Except for gains in services and iPads, sales in every product category fell. Earnings per share came in at $1.88.
According to Refinitiv IBES data, analysts expected sales of $121.1 billion and profits of $1.94 per share. Cook told Reuters in an interview that the production disruptions that plagued Apple's critical quarter were now over.
"Production is now back where we want it to be," he said.
Apple faced a slew of challenges during its fiscal first quarter, which ended on December 31, leaving Wall Street expecting lower sales. Supply chain pressures were chief among them, as COVID lockdowns at a production facility in Zhengzhou, China, slowed production of the iPhone 14 Pro and Pro Max devices, both of which are high-priced models that have traditionally helped drive Apple's margins higher.
Cook stated that the Chinese supply and demand constraints created a dual challenge, with Greater China sales falling 7% to $23.9 billion.
However, Apple is now being held back by product issues.
"They still feel demand will be soft, but they've rectified production, which means that if demand does go up unexpectedly, they can ramp" to meet it,” said Ben Bajarin of analyst firm Creative Strategies.
The strong US dollar also hurt Apple, which gets more than half of its revenue from outside the Americas, but the impact was less severe than expected as the dollar fell from last year's highs. Apple had warned investors that such foreign-exchange issues would have a 10% negative impact on sales, but it revealed on Thursday that the actual impact was only 8%. Foreign exchange rates are expected to have a 5% impact on Apple's fiscal second quarter results.
"I would point out that 8% is still a very severe headwind," Cook told Reuters. "I wouldn't want to underestimate that. We would have grown on a constant currency basis."
In addition to the iPhone's supply chain issues, Wall Street analysts expected iPhone sales to fall this year as part of a larger trend in which the iPhone 14 family released last year sells more slowly after two years of strong sales of iPhone 12 and 13 models. Apple reported $65.8 billion in iPhone sales, an 8% decrease from the previous year and the first drop since 2020.
Only two segments expanded. The company's services segment, which includes content businesses like Apple TV+ and software businesses like the App Store, increased its revenue by 6% to $20.8 billion. According to Refinitiv data, iPad sales increased 30% to $9.4 billion, exceeding analyst expectations of $7.8 billion.
"The report was not good. The guidance wasn't great either. But it doesn't seem to matter. This market has just a relentless 'buy the dip' mentality," said Dennis Dick, a trader at Triple D Trading who does not have a position in Apple stock.
According to Cook, the company now has 2 billion active devices, up from 1.8 billion a year ago. According to him, the company now has 935 million paid subscriptions, up from 900 million the previous quarter, and that services sales set a record in several markets, including China.
Sales of the company's Mac computers, which had soared during the pandemic's wave of working from home, fell 29% year on year to $7.7 billion. Wearables and accessories, which include the Apple Watch and AirPods, dropped 8% to $13.5 billion.

Christopher J. Mitchell

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