IPhone sales decline continues to hurt Apple profits

A decline in sales of its iconic iPhone caused Apple to post its third consecutive decline in quarterly revenue and profit late last night.

The results also marked Apple’s first decline in annual revenue and profit since 2001.

For the fiscal fourth quarter, ended September 24, Apple said net income fell 19% to $9bn, or $1.67 a share, from $11.1bn, or $1.96 a share, in the same period a year earlier.

Analysts polled by Thomson Reuters had expected earnings of $1.65 per share.

Revenue declined 9%, to $46.9bn, mostly ahead of the launch of the iPhone 7, which went on sale a week before the end of the quarter.

Still, Apple remains the most profitable US company, with net income of $45.7bn for the fiscal year it just ended.

Tim Cook, Apple’s chief executive, said improvements in the company’s services business and the introduction of its flagship iPhone in particular were improving the company’s outlook for the coming quarter.

“The customer response has really been off the charts,” he said.

“We couldn’t be more happy with how it’s been received.”

Apple issued a bullish forecast for the current quarter, which includes both the holiday-shopping season and sales of its new phone.

The company said it expects revenue of $76bn to $78bn in the quarter, which would be an increase from $75.9bn in the same period a year earlier.

Before Apple’s announcement, analysts had expected revenue in the current quarter of $74.9bn, according to FactSet.

Apple also projected gross margin, a closely watched measure of profitability, of 38% to 38.5%, even to slightly up from 38% in the just-completed quarter.

Neil Cybart, an independent analyst who follows Apple, said revenue projections for the current quarter implies Apple expects iPhone unit sales to rise more than 5% from a year earlier, when the iPhone 6S was its newest model.

The iPhone accounted for 63% of Apple’s revenue in the just-completed fiscal year, but growth in the smartphone market has slowed recently and consumer buying habits are changing. In the fourth quarter, Apple said it sold 45.5m iPhones, 2.5m fewer than a year earlier.