Apple Reports Strong Q4 Results, but Faces Sales Decline in China

Apple has reported its fiscal Q4 results for 2023, surpassing revenue and earnings estimates. However, the tech giant experienced a 13% decline in sales in China, one of its most important markets. This led to Apple shares falling by more than 4% in extended trading as concerns over iPhone sales were raised.

According to LSEG, formerly known as Refinitiv, Apple’s revenue and earnings exceeded consensus expectations for the quarter ending December 30. However, the company did not provide guidance for the current quarter ending in March.

Apple’s CFO, Luca Maestri, mentioned that iPhone sales in the March quarter were expected to be similar to last year’s numbers after adjusting for outperformance attributed to supply recovery post-Covid shutdowns. Additionally, Maestri stated that total company revenue was projected to be similar to last year, with services expected to grow at the same rate as the previous quarter.

Despite the decline in sales in China, Apple reported 2% sales growth in the December quarter, breaking a streak of four consecutive quarters with annual revenue declines. The company’s gross margin also rose, nearly reaching 46%. Furthermore, Apple’s net income for the quarter amounted to $33.92 billion, a 13% increase from the same period last year.

Apple CEO Tim Cook emphasized that the growth rates achieved this quarter represented a significant acceleration, citing the difference in the number of weeks compared to the previous year’s fiscal Q1. iPhone sales came close to revised Street expectations, growing by nearly 6% to $69.70 billion. This indicated positive reception for the iPhone 15 models released in September.

The services business, including Apple Music, performed well with an 11% revenue increase during the quarter. However, it fell slightly short of estimates. Apple’s focus on services growth is evident as it reported over 1 billion paid subscriptions, which includes subscriptions to apps through the App Store.

Apple experienced sales growth in all regions except for Greater China, where sales fell by almost 13% compared to the same period last year. Tim Cook addressed concerns over iPhone sales in the region, highlighting that when taking into account the strong dollar against the RMB, the decline turned into a mid-single digit number. Additionally, he mentioned that Apple’s products accounted for four out of the top six best-selling smartphones in urban China.

The Mac product line showed modest growth, but iPad sales continued to decline by 25% during the quarter. Apple’s wearables business, including AirPods and Apple Watch, also experienced an 11% decline in sales. However, it managed to surpass Street estimates.

During the quarter, Apple spent nearly $27 billion on dividends and share repurchases. Despite strong performance in Q4, investors have expressed concern over Apple’s performance in China and the overall outlook for iPhone sales in the current quarter.