Apple’s revenue growth streak snapped after supply chain woes

Apple broke a 14-quarter streak of revenue growth as supply chain problems in China delayed delivery of iPhones during the critical holiday period.

Total revenue in the quarter fell 5.5 per cent to $117.2bn, below forecasts of $121.1bn, according to Refinitiv. Analysts had been pricing in a 2 per cent decline after Apple warned of supply chain disruptions in November. Net profits fell 13.4 per cent to $30bn, below forecasts of $31bn.

Sales of iPhone fell 8.2 per cent to $65.8bn, versus forecasts for a 3.4 per cent fall to $69.2bn.

Apple finance chief Luca Maestri told the Financial Times that without the disruptions iPhone sales would have grown. He declined to estimate what the shortfall was, saying: “We lost significant production.” Chief executive Tim Cook in a statement described the environment as “challenging”.

The company had warned three months ago that foreign exchange headwinds could shave up to 10 percentage points off revenue, equal to a roughly $12bn hit. According to the results on Thursday, the actual impact was about 8 percentage points.

“Eight per cent is a lot of revenue that we lost to the strength of the dollar, but it’s better than it was three months ago because the dollar has weakened a bit,” he said. “Inflation is still going up in the UK, and started to mitigate a bit in the United States, so that is affecting currencies as well.”

Maestri said Apple’s “active installed base” — the number of iPhone, iPad and other devices in use — has crossed 2bn, up from 1.8bn a year ago. “This is twice the number of active devices that we had just seven years ago,” he said.

Sales of its Mac computer plunged 29 per cent to $7.74bn and revenues from the wearables unit, which sells the Apple Watch and AirPods, dropped 8.3 per cent to $13.5bn.

Revenue from the fast-growing services unit, which houses the App Store and digital media purchases, rose 6.4 per cent to a record $20.8bn. Sales of the iPad were another bright spot, soaring 29.6 per cent to $9.4bn

Apple’s challenges are distinct from those facing other Big Tech groups such as Meta and Alphabet, or even rival hardware maker Samsung. While demand has remained strong, it has been struggling to fulfil orders since a Covid outbreak at “iPhone City” in Zhengzhou, an assembly hub run by partner Foxconn, prompted the warning in November of “significant” disruptions to supply.

The Cupertino-based group lost $1tn in market capitalisation in a 12-month period to early January, when it briefly fell below $2tn. But sentiment has rebounded, sending Apple’s stock up about 20 per cent since the start of the year.

Shares fell more than 3 per cent in after-hours trading.