Apple shows its steepest quarterly decline in iPhone sales since pandemic's outset

[JohnS]

Apple shows its steepest quarterly decline in iPhone sales since pandemic's outset

May 3, 20245:22 AM ET By The Associated Press

In this June 16, 2020 file photo, the sun is reflected on Apple's Fifth Avenue store in New York. Mark Lennihan/AP

Apple on Thursday disclosed its steepest quarterly decline in iPhone sales since the pandemic's outset, deepening a slump that's increasing the pressure on the trendsetting company to spruce up its products with more artificial intelligence.

The 10% drop in year-over-year iPhone sales for the January-March period is latest sign of weakness in a product that generates most of Apple's revenue. It marked the biggest drop in iPhone sales since July-September period in 2020, when production bottlenecks caused by factory closures during the pandemic resulted in a delayed release of that year's model.

The current iPhone downturn was the main reason Apple's revenue for the latest quarter decreased 4% from last year to $90.8 billion. It marked the fifth consecutive quarter that Apple's revenue dipped from the previous year. Apple's profit in the past quarter totaled $23.64 billion, or $1.53 per share, a 2% dip from last year.

But both Apple's revenue and earnings per share came in slightly above analysts projections, according to FactSet Research. Apple also predicted its revenue for the April-June quarter will rise modestly from a year ago, which would end the recent streak of erosion.

Part of the iPhone deterioration during the first three months of the year stemmed from a big boost in sales during the same period last year when Apple said it was filling pent-up demand caused by pandemic-driven shipment delays.

Even as it stumbles slightly, Apple remains one of the world's most prosperous companies. The Cupertino, California, company hammered home that point by announcing a 4% increase in its quarterly dividend to 25 cents per share. The company also committed to spending $110 billion buying back its own stock, a move that investors cheered but may fuel criticism that Apple is spending more money catering to Wall Street than creating more innovative products.

Bolstered by the increased dividend and stock repurchase commitment, Apple's shares rose nearly 7% in extended trading after the news came out. The stock price has fallen 10% so far this year, erasing about $300 billion in stockholder wealth.

Although investors have been dismayed by the weakening iPhone sales, they are also concerned Apple may be losing its edge as other tech giants such as Microsoft and Google sprint out to the early lead in artificial intelligence technology that is expected to reshape the industry and technology.

The latest quarterly report "leaves no margin for doubt about Apple's current state of affairs," said Investing.com analyst Thomas Monteiro. "More than ever in the past decade, the company needs new products and solutions."

Apple is widely expected to unveil more AI services in June during an annual conference showcasing the next version of its software for the 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 Thursday conference while promising more details will be announced soon.

Weak sales in China were again a factor in the latest quarter, with revenue in that region falling 8% from last year to $16.37 billion as rival smartphone makers gained ground in one of the company's largest markets. Even so, analysts had been anticipating an even bigger sales decline in the results, providing investors with a measure of relief.

Apple had a few bright spots in the past quarter too, most notably in its service division, which saw its revenue rise 14% from the year before to $23.87 billion.

The division reaps a significant portion of its revenue from a lucrative deal that locks in Google as the search engine that automatically answers queries on the iPhone — an arrangement that is a focal point of an antitrust trial currently wrapping up with closing arguments in Washington this week.

Commissions collected on digital transactions within iPhone apps are also a major revenue source within Apple's services division, an area being targeted in a U.S. Justice Department lawsuit alleging the company is running an illegal monopoly that locks out competition to the detriment of consumers.

That case is expected to take several years to resolve, but European regulators already are forcing Apple to allow more alternatives to its proprietary iPhone app store as part of the Digital Markets Act.

Source: https://www.npr.org/2024/05/03/1248865513/apple-quarterly-decline-iphone-sales

[LLC]

Bought some more stock a few weeks ago on the dip and it’s up 7% in the last month. When they start incorporating AI more into devices likely this fall I expect it to be good for the stock. They have the ability to continue to return large sums to share holders without really affecting their cash on hand. Pretty good for a struggling company.


Sent from my iPhone using Tapatalk

[MrBirdman]

2 hours ago, LLC said:

Pretty good for a struggling company.

That’s the thing though - their core business is struggling. I’m not sold on the value or durability of generative AI for everyday personal use outside maybe improved voice recognition. Right now AI is often associated with LLMs, which are far too large to run on mobile hardware. More realistic application are functions that mobile devices have had for a while - picture correction, voice recognition, personalized content, etc. In that respect, the primary value add of onboard AI is with privacy, but where that’s even relevant it is often already covered by how data is used in the cloud. My point isn’t that onboard doesn’t have any advantages - it does - but they are unlikely to overcome the hurdles in Apple’s iPhone business. 

Apple has generated a ton of profit using the same anticompetitive business practices that are coming under scrutiny now. Meanwhile they’re blowing huge amounts of money on projects that are being cancelled (like their car) or landing with a thud (like the Vision Pro). So I’m an Apple skeptic for the time being.

[joeypots]

All I know for sure about Apple is that it has, so far, defied the skeptics.  

[MrBirdman]

7 hours ago, joeypots said:

All I know for sure about Apple is that it has, so far, defied the skeptics.  

I’m not sure Apple has had many skeptics. It’s priced as a growth stock even though they’re struggling to achieve growth. The primary reason their share price is continuing to do well is stock buybacks, which helps managements payouts more than the company’s long term value (though given how poorly they’ve managed a lot of their R and D it was probably the best way to use the cash). 

[raggie]

19 hours ago, MrBirdman said:

[…] projects that are being cancelled (like their car) or landing with a thud (like the Vision Pro).

My views on these “failed” projects is they’re often some of the first to bring this new tech to consumers in a digestible and user friendly way. As a tech lad, I can learn my way around a VR headset or more complicated products, but so many average users barely grasp the concept of “AI.”

This is the worst we’ll see AR headsets or integrated AI be. The consumer data Apple can collect and learn from will propel them in the field, mainly around incorporating said tech into mainstream products. Sure, a random startup would probably have better core technology but combined with Apples pre existing, albeit declining, market share will prove better and better.

[joeypots]

23 hours ago, MrBirdman said:

I’m not sure Apple has had many skeptics. It’s priced as a growth stock even though they’re struggling to achieve growth. The primary reason their share price is continuing to do well is stock buybacks, which helps managements payouts more than the company’s long term value (though given how poorly they’ve managed a lot of their R and D it was probably the best way to use the cash). 

I’m not an analyst, just a retail investor. Since I’ve been watching APPL and reading and listening to financial news, I’ve heard a chorus of those who say the stock is overvalued and the company is mature. Its best days are behind it. That’s all I’m saying. I understand that the buy backs will prop up the share price, buts that’s a good thing for now, no? Maybe the next iPhone cycle will tell the tale. I have a 13 and if the next handset doesn’t offer any significant new features that I can use, I can’t see buying a new one until this one is dead.

[Li Bai]

23 hours ago, MrBirdman said:

I’m not sure Apple has had many skeptics.

Fwiw, I'm one of them. I was never skeptical about their financial success, rather about their business model.

Well, skeptical may not be the right word, I despise it. I see lots of people struggling financially but still buying the "new" iPhone every year... Apple made amazing breakthroughs, I'm not denying that, but it has since then contributed to a nonsensical money-based elitism we should deeply question, imo. 

And btw, I totally share Bill Burr's opinion on Steve Jobs...

[MrBirdman]

7 hours ago, joeypots said:

I’m not an analyst, just a retail investor. Since I’ve been watching APPL and reading and listening to financial news, I’ve heard a chorus of those who say the stock is overvalued and the company is mature. Its best days are behind it. That’s all I’m saying. I understand that the buy backs will prop up the share price, buts that’s a good thing for now, no? Maybe the next iPhone cycle will tell the tale. I have a 13 and if the next handset doesn’t offer any significant new features that I can use, I can’t see buying a new one until this one is dead.

Oh yeah the buybacks are good for share price there’s no doubt on that, and it’s not an unreasonable way to return earnings to shareholders as long as it doesn’t compromise investing for the future. I’m not surprised that lately there’s been more doubters but that’s probably because the stock is trading at a somewhat high multiple, and the market skepticism can’t be that high because the share is trading near all time highs. To be clear, I’m sure there have been many apple skeptics all along, but my skepticism is more recent and longer term, I’m not saying I think Apple will tank by 2025. But their core business is struggling and I don’t think AI is going to turn it around. 

[MrBirdman]

7 hours ago, Li Bai said:

And btw, I totally share Bill Burr's opinion on Steve Jobs...

I don’t know what he says about Jobs - to me he’s not much different than Gates, a very smart but uncompromising business person. The hagiographication of Jobs always struck me as bizarre and probably another expression of Apple fanboy-ism. Apple devices didn’t cure polio or cancer, they helped usher in an era where we can’t escape our digital lives. That doesn’t make Jobs a bad guy, but he certainly didn’t save the world!

Again, he was a smart businessman, and Tim Cook has in my opinion done little more than ride the coattails of the business he took over. The one major money maker whose development he’s overseen is the AirPods division, which is high profitable but hardly revolutionary, and was a pretty obvious move to make. Other moves like that stupid car (10-figures down the drain) or the Vision Pro strike me as him wasting money on long shot projects to revitalize the company’s image as an innovator. To the extent he’s driven earnings, it was by doubling down on the anti-competitive practices started under Jobs. And it worked for a while, quite well, though I don’t really see that as valuable leadership.

To me, Musk earned the $50B he was stripped of far more than Cook has earned the $1 billion+ he’s likely made at Apple. Though to be clear, I don’t think anyone can actually earn $50 billion, even over a decade. But in America’s incestuous board rooms they can certainly make it, apparently! 

[Li Bai]

6 hours ago, MrBirdman said:

That doesn’t make Jobs a bad guy, but he certainly didn’t save the world!

That's kinda what he said, I'll find a link to a video...

There it is:

[MrBirdman]

5 hours ago, Li Bai said:

That's kinda what he said, I'll find a link to a video...

There it is:

Yeah basically mirrors my opinions. Jobs marketed himself very well because, despite all the evidence he was an irritable narcissist, a lot of people perceived him to be a sort of tech Jesus. Even my dad was a big fan until finding out how little Jobs donated to charity in life or death; he’s always seen that as the best index for a rich person’s character. I really wonder how his legacy would have changed were he still alive now, when big tech is increasingly unpopular.

Even his death was in some ways a reflection of his attitude - no one who gets cancer is “lucky” but if you have to get pancreatic cancer he had the rare form which is eminently treatable with good long-term outcomes. But I guess he thought he was special enough to beat it with salads. Cost him his life.