# Apple’s weak iPhone sales drive first profit miss since 2016 Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-02-02 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Apple Inc reports weak iPhone sales after COVID lockdowns Meta Description: Apple Inc reported weak iPhone sales and profits below Wall Street expectations due to COVID lockdowns, but services and iPads sales saw gains. URL: https://financedigest.com/apples-weak-iphone-sales-drive-first-profit-miss-since-2016html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-02-02t213509z2lynxmpej110zyrtroptp4apple-results-1736814490470-compressed.jpg) By Stephen Nellis (Reuters) – Apple Inc on Thursday reported sales and profits that missed Wall Street expectations driven by weak iPhone sales after COVID lockdowns in China disrupted production of the company’s biggest seller. Shares of Apple fell 5% after publication of the results. Apple [sales fell 5% to $117.2 billion](https://www.financedigest.com/allianz-puts-n26-stake-up-for-sale-at-3-billion-valuation-ft.html "Allianz puts N26 stake up for sale at billion valuation – FT") and were down in every part of the world in the quarter. [Sales from each product](https://www.financedigest.com/flooded-lead-acid-battery-regional-landscape-production-sales-consumption-status-and-prospects.html "Flooded Lead Acid Battery Regional Landscape, Production, Sales & Consumption Status and Prospects") category dropped, except for gains in services and iPads. Earnings per share were $1.88, Apple’s first miss of Wall Street’s [profits expectations](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") since 2016. Analysts had expected sales of $121.1 [billion and profits of $1.94 per share](https://www.financedigest.com/abb-to-launch-1-billion-share-buyback-on-april-3.html "ABB to launch billion share buyback on April 3"), according to IBES data from Refinitiv. Apple Chief [Executive Tim Cook told Reuters that the production disruptions that plagued Apple’s key](https://www.financedigest.com/aon-benfield-launches-managed-care-services-platform-with-the-appointment-of-three-key-executives.html "Aon Benfield launches Managed Care Services platform with the appointment of three key executives") quarter were now over. During its [fiscal first quarter ended](https://www.financedigest.com/hp-to-cut-about-12-jobs-by-end-of-fiscal-2025.html "HP to cut about 12% jobs by end of fiscal 2025") Dec. 31, Apple faced a wave of challenges that left [Wall Street](https://www.financedigest.com/asian-stocks-edge-up-before-u-s-jobs-data-defying-wall-street-selloff.html "Asian stocks edge up before U.S. jobs data, defying Wall Street selloff") expecting lower sales. Chief among those were supply chain pressures when COVID lockdowns at a production facility in Zhengzhou, China, slowed production of iPhone 14 Pro and Pro Max devices, both premium priced models that would traditionally help [drive Apple’s margins higher](https://www.financedigest.com/maserati-aims-at-driving-margins-higher-before-any-spin-off-talk.html "Maserati aims at driving margins higher before any spin-off talk"). In an interview with Reuters, Cook said that production disruptions “lasted through most of December” but that [“production is now back where we want it to be.” Cook said the lockdowns in China created](https://www.financedigest.com/4-tips-for-creating-a-calm-workspace-to-boost-productivity.html "4 tips for creating a calm workspace to boost productivity") a dual challenge where both supply and demand were constrained, with greater China sales falling 7% to $23.9 billion. When things started to reopen in December (in China), we did [see an increase in traffic](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels") to our stores as compared to November and an increase in demand as December rolled around,” Cook told Reuters. The strong U.S. [dollar also hurt Apple, which derives more than half its sales from outside the Americas, but the effect was less than anticipated as the dollar eased from last year’s](https://www.financedigest.com/dollar-creeps-up-in-subdued-start-to-new-year.html "Dollar creeps up in subdued start to new year") highs. [Apple had warned investors that such foreign-exchange issues](https://www.financedigest.com/apple-says-issues-with-imessage-facetime-resolved35792.html "Apple says issues with iMessage, FaceTime resolved") would put a 10% on drag on sales but said on Thursday that the actual effect was 8%. “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.” On top of supply chain problems for the iPhone, Wall Street analysts had expected iPhone sales to fall this year as part of a larger pattern in which the iPhone 14 family released last year sells more slowly after two straight years of [strong](https://www.financedigest.com/indias-tata-motors-jumps-to-a-7-month-high-on-strong-q4-jlr-sales.html "India’s Tata Motors jumps to a 7-month high on strong Q4 JLR sales") sales of iPhone 12 and 13 models. [Apple said iPhone](https://www.financedigest.com/an-apple-a-year-half-of-iphone-users-will-upgrade-to-the-iphone-7.html "AN APPLE A YEAR: HALF OF IPHONE USERS WILL UPGRADE TO THE IPHONE 7") sales were $65.8 billion, down 8% from the year before and below analyst estimates of $68.3 billion. The company’s services segment, which includes content businesses such as Apple TV+ and software [business like the App](https://www.financedigest.com/why-mobile-apps-are-crucial-for-a-successful-business.html "Why Mobile Apps are Crucial for a Successful Business") Store, rose 6% to $20.8 billion in revenue, compared with analyst expectations of $20.7 billion, according to Refinitiv data. Cook told Reuters that the [company now has a base of 2 billion active](https://www.financedigest.com/what-happens-if-a-company-doesnt-have-any-records-of-its-rd-activities.html "What happens if a company doesn’t have any records of its R&D activities?") devices, up from 1.8 billion a year ago. The company now has 935 million paid subscriptions, up from 900 million the quarter before, and that services [sales set a record](https://www.financedigest.com/truck-maker-volvo-posts-record-q1-as-sales-margins-beat-forecasts.html "Truck maker Volvo posts record Q1 as sales, margins beat forecasts") in several markets, including China, he said. Sales of the company’s [Mac computers](https://www.financedigest.com/apple-may-add-touch-screens-to-mac-computers-bloomberg-news.html "Apple may add touch screens to Mac computers – Bloomberg News"), which had boomed during the wave of working from home during the pandemic, declined 29% year over year to $7.7 billion, compared with expectations of $9.6 billion, according to Refinitiv data. Apple executives had warned last year that Mac [sales](https://www.financedigest.com/home-battery-sales-in-germany-may-surge-59-this-year-study.html "Home battery sales in Germany may surge 59% this year -study") were likely to decline year over year because the previous year’s results included a burst of sales associated with the release of new MacBook Pro computers with Apple’s house-designed processors. Sales of the iPad, which also saw a pandemic-related boost, grew 30% to $9.4 billion, compared with analyst [expectations of $7.8 billion](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than billion in fines for WhatsApp use"), according to Refinitiv data. The wearable and accessories segment, which includes the Apple Watch and AirPods, fell 8% to $13.5 billion compared with analyst [estimates](https://www.financedigest.com/electric-kick-scooter-market-is-projected-to-reach-6-5-billion-by-2031-and-estimated-to-grow-at-11-5-cagr-between-2021-and-2031.html "Electric Kick Scooter Market is Projected to Reach .5 billion by 2031, And estimated to grow at 11.5% CAGR between 2021 and 2031") of $15.2 billion, according to Refinitiv data. Cook told Reuters the iPad’s strong performance stemmed from the launch of new models and the absence of supply constraints that had hindered [sales of the device a year](https://www.financedigest.com/uk-car-sales-hit-30-year-low-in-2022-but-could-grow-15-this-year-smmt.html "UK car sales hit 30-year low in 2022, but could grow 15% this year – SMMT") earlier. Apple investors are waiting to [see whether the company dives into new markets this year](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers"). Technology publication The Information has reported that Apple plans to launch a mixed-reality headset that could [retail for around $3,000 this year](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year") and is also working on a more affordable follow-up device. Apple is one of the few large [technology firms](https://www.financedigest.com/technology-trends-heat-up-for-financial-firms.html "Technology trends heat up for financial firms") that has not announced major layoffs, though its ranks never grew as rapidly as that of its peers. In late 2022 it said it had 164,000 employees, up less than 20% from its 2019 headcount. By contrast, other companies such as [Meta Platforms](https://www.financedigest.com/meta-to-wind-down-nfts-on-platforms-amid-crypto-bust.html "Meta to wind down NFTs on platforms amid crypto bust") Inc, which is laying off about 11,000 employees, had roughly doubled its headcount between 2019 and 2022. (Reporting by Stephen Nellis in [San Francisco; Additional reporting by Akash Sriram in Bengaluru; Editing by Peter Henderson and Lisa Shumaker)](https://www.financedigest.com/paul-jasper-joins-rimon-laws-san-francisco-office-as-partner.html "Paul Jasper joins Rimon Law’s San Francisco Office as Partner") --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---