Apple beats estimates on revenues of $89.5bn in quarter

The iPhone accounted for $43.81bn in sales in the fourth quarter

Thu, 02 Nov, 2023 - 21:48

Stephen Nellis

Apple has reported quarterly sales and profit that beat analysts' expectations, with iPhone sales edging higher, helping offset large drops in Mac and iPad sales.

The iPhone giant has navigated a global smartphone slump better than many of its rivals but faces an uneven economic recovery in China, a key market for Apple.

In earnings released late on Thursday, Apple said sales for its financial fourth quarter through to the end of September fell roughly 1% to $89.5bn (€84.2bn), with nearly $1bn more in services revenue than Wall Street expected.

Apple shares, which have risen 37% so far this year, were trading lower in after-hours trading. However, the results do not include the bulk of sales from Apple's newest iPhone 15 models.

Tougher competition

Apple is facing tougher competition in the smartphone market this year as Huawei Technologies returns to the field with new phones powered by Chinese-made chips after being all but shut out of the market for several years by US government trade curbs.

Apple's sales in China fell 2.5% to $15bn from $15.5bn in the fourth quarter a year ago. Apple chief executive Tim Cook said that after accounting for foreign exchange rates, Apple's business in China grew year-over-year, driven by iPhone sales and services revenue.

"In mainland China, we set a quarterly record for the September quarter for iPhone," Mr Cook said. "We had four out of the top five best-selling smartphones in urban China."

Mr Cook also said two of Apple's new high-end handset models, the iPhone 15 Pro and Pro Max devices, are facing supply constraints.

"We're working hard to manufacture more of them," he said. "We do believe that later this quarter, we'll reach a supply-demand balance."

Several global trends are also playing in Apple's favour, with forecasters predicting that the smartphone market has bottomed out and may start to recover in 2024. In the longer term, investors are eying how Apple responds to the boom in generative artificial intelligence, an area that has attracted billions in spending by Microsoft and Alphabet's Google.

For now, the iPhone remains Apple's biggest seller. Sales of the device were $43.81bn in the fourth quarter, in line with analyst expectations of $43.81bn. Sales in Apple's wearables segment, which includes the Apple Watch and AirPods, fell 3% to $9.32bn, short of estimates.

Apple has faced several quarters of declining sales of Macs and iPads, and the fourth quarter continued that trend. Mac sales slumped by a third to $7.61bn and iPad sales declined 10% to $6.44bn, compared with expectations of $8.63bn and $6.07bn, respectively.