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Apple's fourth consecutive quarterly revenue decline raises investor concerns

PUBLISHED

2023-11-03

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Apple's revenue fell for the fourth consecutive quarter in the three months ending in September, failing to reassure investors about the stability of the so-called Magnificent Seven as dependable market growth supports.

The other tech giants—Alphabet, Amazon, Microsoft, and Meta—reported reasonable figures but struggled to convince investors of their quality. Nvidia is yet to report, while Netflix, excluded from the Seven by analysts, received a favorable reception for its solid quarterly figures, resulting in a 12% increase on the release day last month.

US analysts typically focus on quarterly earnings per share, but the 2022-23 results were noteworthy for a 2.8% annual revenue decline of $US11 billion and a decrease in net income over the year, despite higher income in the final three months.

Net income increased by approximately 11% for the quarter, reaching nearly $US23 billion from $US20.72 billion, while full-year net earnings fell to $US96.995 billion, down from the previous year's record of $US99.803 billion.

This decline in annual revenues, coupled with drops in the past four quarters, confirms that Apple is currently in search of a new growth driver, despite higher prices for its recent products and services.

Even annual revenues for the iPhone decreased compared to the previous year, from just over $205 billion to just over $200 billion.

While Apple's sales and earnings for the quarter exceeded lowered analyst forecasts, overall sales fell for the fourth consecutive quarter in the three months to September, with every line except the iPhone experiencing lower revenues, especially iPad and Mac computers.

Apple did report a 16% increase in revenues for its online service businesses, which partially offset the weak hardware performance. However, analysts emphasize that Apple is primarily driven by hardware and software, with services serving as an additional source of revenue.

Apple shares dipped 2% in after-hours trading but later recovered some of those losses.

Group revenue fell 1% from the previous year to $US89.5 billion, which was worse than inflation, bringing the year's revenue (Apple has a September 30 balance date) to $US383.28 billion, down from more than $US394.2 billion in 2021-22.

iPhone revenues in the quarter were $US43.81 billion, slightly up from $US42.6 billion a year ago but down over the year to just over $US200 billion.

Services revenue totaled $US22.31 billion, a strong increase from $US19.1 billion a year earlier, reaching a total of $US85.2 billion for the full year with an 8% gain (and 16% in the quarter).

CEO Tim Cook mentioned that Apple had over a billion paid subscriptions, including both Apple's own services and apps on the App Store that bill on a recurring basis.

Apple's business in Greater China, its third-largest market, remains under scrutiny due to concerns about increased competition from China's Huawei. Greater China sales remained relatively flat year-over-year, with Apple reporting $US15.08 billion from the region, including Hong Kong and Taiwan.

Apple also announced it would pay a dividend of 24 cents per share this month and mentioned that the company had spent $US25 billion during the quarter on share repurchases and dividends.

The upcoming three months to December, Apple's first quarter, will be a significant test with the new iPhone 15 available for the annual holiday season and new Macs and iPads set to ship.

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