Weak iPhone sales push Apple to halt growth streak

Apple on Thursday reported sales and earnings below Wall Street expectations, driven by sluggish iPhone sales after Covid-19 restrictions in China halted production of the company’s best-selling product.

Apple’s sales fell 5% in the quarter to $117.2 billion, with declines in all parts of the world.

Apple still posted declining sales in every product category, except for gains in services and iPads.

The company’s earnings per share were $1.88, the first time Apple has delivered a result below market expectations since 2016. Analysts had expected sales of $121.1 and earnings of $1.94 per share , according to data from IBES, from Refinitiv.

Apple shares were down 5% in the aftermarket.

Apple Chief Executive Tim Cook told Reuters that the production disruptions that plagued Apple’s quarter are over.

During the first fiscal quarter – ended December 31 – Apple faced a wave of challenges that made Wall Street project a drop in sales.

Chief among these was pressure on the supply chain, as Covid-19 restrictions at a supplier factory in Zhengzhou, China, slowed production of iPhone 14 Pro and Pro Max. Both models are priced at a premium, which traditionally helps boost Apple’s margins.

The strong dollar also hurt the company, which gets more than half of its sales outside the Americas, but the effect was less than expected, as the North American currency has already given way from the peaks reached last year. Apple had warned investors that such currency issues would hurt sales by 10%, but said on Thursday the actual effect was 8%.

The company said iPhone sales were $65.8 billion for the quarter, down 8% from the same period a year ago and below analysts’ estimates of $68.3 billion.

The company’s services segment, which includes content businesses such as Apple TV+ as well as software such as the App Store, rose 6% in revenue to $20.8 billion, compared with analysts’ expectations of $20.8 billion. 20.7 billion, according to data from Refinitiv.

Sales of Mac computers, which surged during the pandemic-driven work-from-home wave, fell 29% year-over-year to $7.7 billion. Analysts projected $9.6 billion.

Apple executives warned last year that Mac sales were likely to decline year-on-year because the previous year’s results included a sales boom associated with the launch of new MacBook Pro computers with Apple-designed processors.

iPad sales, which had also seen a pandemic-related rise, rose 30% to $9.4 billion, compared with an analyst estimate of $7.8 billion, according to Refinitiv data.

Revenue from the accessories segment, which includes the Apple Watch and AirPods, fell 8% to $13.5 billion, compared with market expectations of $15.2 billion.