Apple on Thursday reported its biggest quarterly decline in iPhone sales since the start of the pandemic, deepening a slump that is increasing pressure on the trendsetting company to enhance its products with more artificial intelligence.
The 10% drop in annual iPhone sales from January to March is the latest sign of weakness for a product that generates most of Apple’s revenue. It was the biggest drop in iPhone sales since the July-September 2020 period, when production bottlenecks caused by factory closures during the pandemic resulted in the launch of that year’s model being delayed.
The current iPhone crisis was the main reason why Apple’s revenue last quarter decreased 4% from last year to $90.8 billion. Marked the fifth consecutive quarter that Apple’s revenue fell compared to the previous year. Apple’s profit last quarter totaled $23.64 billion, or $1.53 per share, a 2% drop from last year.
But both Apple’s revenue and earnings per share came in slightly above analyst projections, according to FactSet Research. Apple also forecast that its revenue for the April-June quarter will rise modestly from a year ago, which would put an end to the recent wave of erosion.
Part of the iPhone’s deterioration during the first three months of the year resulted from a huge increase in sales during the same period last year, when Apple said it was meeting pent-up demand caused by shipping delays caused by the pandemic.
Even with some stumbles, Apple remains one of the most prosperous companies in the world. The Cupertino, California company hammered home this point by announcing a 4% increase in its quarterly dividend, to 25 cents per share. The company also committed to spending $110 billion on repurchasing its own shares, a move that investors applauded but which could fuel criticism that Apple is spending more money pandering to Wall Street than creating more innovative products.
Buoyed by dividend increases and share buyback commitments, Apple shares rose nearly 7% in extended trading after the news broke. The stock price has fallen 10% so far this year, wiping out about $300 billion in shareholder wealth.
While investors have been dismayed by weakening iPhone sales, they are also concerned that Apple is losing its edge as other tech giants such as Microsoft and Google take the lead in technology. of artificial intelligence, which is expected to reshape industry and technology.
The latest quarterly report “leaves no room for doubt about Apple’s current situation,” said Thomas Monteiro, an analyst at Investing.com. “More than ever in the last decade, the company needs new products and solutions.”
Apple is expected to unveil more AI services in June during an annual conference showcasing the next version of its software for iPhone and Mac computers.
“We believe in the transformative power and promise of AI and we believe we have advantages that will differentiate us in this new era,” Apple CEO Tim Cook assured analysts during a conference on Thursday, promising that more details will be announced. shortly.
Weak sales in China were again a factor last quarter, with revenue in that region falling 8% from last year to $16.37 billion as rival smartphone makers gained ground in one of China’s biggest markets. company. Even so, analysts predicted an even greater drop in sales in the results, providing investors with some relief.
Apple also had some bright spots last quarter, particularly in its services division, which saw its revenue increase 14% year-over-year to $23.87 billion.
The division derives a significant portion of its revenue from a lucrative deal that establishes Google as the search engine that automatically responds to queries on the iPhone – a deal that is a focal point of an antitrust trial currently concluding with closing arguments in Washington this week.
Commissions charged on digital transactions in iPhone apps are also an important source of revenue in Apple’s services division, an area that is the target of a US Department of Justice lawsuit. claiming that the company runs an illegal monopoly which blocks competition to the detriment of consumers.
This case is expected to take several years to resolve, but European regulators are already forcing Apple to allow more alternatives to its proprietary iPhone app store as part of the Digital Markets Act.
