Tech giant Apple missed its earnings expectations last quarter, posting its first revenue decline since 2019. The company published the underwhelming earnings reports on Thursday, citing declining sales in multiple lines of business as the reason for the negative growth.
The tech company recorded a 5.49 percent annual decline in revenue, posting $117.15 billion against the $121.10 billion estimates. Likewise, its earnings per share (EPS) was $1.88 against the $1.94 estimates — down 10.9 percent compared to the same period last year.
Apple's iPhone division gained $65.78 billion last quarter, down 8.17 percent from the year before. The Macbook division recorded the biggest year-over-year decline of 28.66 percent or $7.74 billion. Revenue from add-on products like AirPods was also down 8.3 percent.
The iPad business line was Apple's biggest gainer at $9.4 billion, going up by 29.66 percent compared to Q4 of 2021. The surge in revenue came following the release of a new basic, inexpensive model and a high-end model within the quarter. Its services business also gained a 6.4 percent annual increase, posting $20.77 billion in revenue.
The result of the last quarter of 2022 was also its largest revenue drop since Q3 of 2016. Additionally, it was only Apple's second time missing a quarterly earnings forecast.
Apple CEO Tim Cook said the strengthening dollar, issues in Apple's production network in China and the uncertain macroeconomic environment contributed to the company's revenue loss.
“On the third factor, I would say was just the challenging macroeconomic environment, and you’re hearing that from, I would think, everybody.”
Tim Cook, CEO of Apple, Inc.
The decline in Apple's sales was because the company's most potent growth happened in countries whose currencies suffered devaluation due to a stronger greenback. It reduced the affordability of Apple products in these markets, leading to lower sales.
Apple's assembly facility in China also experienced the effect of COVID-19 lockdowns during the quarter. It resulted in a significantly lower supply of iPhone 14 Pro and iPhone 14 Pro Max, meaning that there were fewer units to sell to consumers.
"We put out an update on that on November 6th, and it lasted through most of December," Cook said. "So we had a big hole there."
Meanwhile, the uncertain macroeconomic situation, according to Cook, especially affected the iPhone and Mac divisions. Cook was adamant that the decline in Mac sales happened due to the difficulty in comparing its year-over-year quarterly sales since the company released a high-end MacBook Pro the year before.
Despite the gloomy quarterly earnings, Apple said the quarterly result indicated the company's potential to expand its global market. The Q3 result also showed the potential of its services division and wearable technology. Apple Watch, for example, saw a potential to reach a broader market.
"We attribute that to having a lot of switchers and a lot of first-time buyers in the case of the Apple Watch," said the CEO. "And so obviously, you need to bring in people that are not currently active on a device in order to grow."
Forecast for Q1 of 2023
Following the earnings report, Apple shares went down by almost four percent momentarily on Wall Street. However, shares soon went up again after the iPhone manufacturer announced an earnings forecast for the current quarter.
Company data indicated that iPhone sales would not decline as quickly as in the previous quarter. However, Apple CFO Luca Maestri predicted that Q1 of 2023 would maintain the declining revenue trend.
Maestri expected that the services division — which beat initial projections last quarter — would also grow this quarter. On the other hand, Mac and iPad sales will post year-over-year declines. iPhone sales will also decline but at a slower rate than in the December quarter.
Apple also said it would soon launch a buy-now-pay-later feature, which will be available on its booming financial services, including Apple Pay and Apple Card.