June 24, 2024

Apple’s iPhone Sales Drop While Services Soar in Latest Earnings

Written by AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

Feb 1, 2024

Apple reported its first quarter fiscal 2024 earnings on February 1st, showing slowed iPhone sales but strong growth in services. While overall revenues declined year-over-year, the results beat Wall Street expectations.

iPhone Demand Falls in China Amid Broader Smartphone Slump

The key revenue generator for Apple remains the iPhone, representing over 50% of total sales. However in Q1 iPhone revenues fell 10% year-over-year to $65.8 billion. This marks the third consecutive quarterly decline, attributed primarily to softening demand in China.

China has proven an increasingly difficult market for Apple. Many Chinese consumers are holding onto devices longer before upgrading. This reflects a broader slump in worldwide smartphone demand. Global smartphone shipments fell 18% in Q4 2023. With fewer consumers rushing out to buy the latest iPhones, Apple has relied more on services to drive growth.

Q1 iPhone Unit Sales 2023 2024 YOY Change
iPhones (millions) 84.5 77.3 -8%

Moving forward, Apple is counting on new products like augmented reality glasses to reinvigorate hardware sales. But these remain years away, with CEO Tim Cook describing the technology as still “in the very early innings”. In the meantime, 5G upgrades and expanded trade-in programs may spur more iPhone purchases if global economies recover.

Mac and Wearables See Strong Holiday Season

While iPhone revenues dropped, other hardware categories showed surprising resilience. Sales of Mac computers soared 25% to reach $11.5 billion, driven by the release of new M2-powered laptops and work-from-home demand. Apple Watch and AirPods sales gained 15%, topping $13 billion.

Apple saw robust sales from November through the start of January thanks to the holiday shopping season. But analysts cautioned that demand may fade later in 2023. Consumers typically pull back spending amid economic uncertainty, with many forecasters warning of recession by late 2024.

Services Segment Now Apple’s Fastest Growing

As iPhone sales decelerate, Apple’s services ecosystem has taken on greater importance. The services division – comprising offerings like Apple Music, iCloud, Apple TV+, Apple Care, and more – generated $23.2 billion in revenue last quarter. That’s up 6% year-over-year, making services Apple’s new engine for growth.

Q1 Services Revenue 2023 2024 YOY Change
Total Services ($, billions) 21.8 23.2 +6%

Much of the strength in services reflects Apple’s aggressive push into new markets like streaming video and fitness. Launched in late 2019, Apple TV+ now reaches over 100 million subscribers according to industry analysts. Apple is plowing billions into exclusive original content to take on rivals Netflix and Disney+.

Meanwhile Apple One bundles together multiple services into discounted subscription packages. This strategy aims to lock in recurring subscription revenue and increase customer loyalty. Moving forward, expect Apple to further integrate hardware with software and services. The company is essentially shifting towards an ecosystem-based business model.

China Headwinds Persist While India Looks Brighter

Apple’s bumpy performance in China remains a key source of uncertainty heading into 2024. Facing both a weakening economy and fierce local rivals like Huawei, Apple saw Greater China sales tumble 7% last quarter. iPhone sales specifically plunged 36% amidst production delays and trade turbulence.

While Apple CEO Tim Cook remains “very bullish on China for the long term”, near term headwinds persist. COVID outbreaks and lockdowns continue disrupting Chinese supply chains and dampening consumer demand. Analysts warn Apple risks permanently losing market share without more aggressive pricing and promotions.

Fortunately India looks positioned to help offset Apple’s China dependence over the coming decade. While still a small piece of Apple’s revenues, India posted record sales growth last quarter. Surging over 60%, Apple now counts over 30 million iPhone users in India. With a massive population and burgeoning middle class, India may emerge as Apple’s next China in terms of production, software development, and consumer adoption.

Apple Stock Rallies on Upbeat Guidance

While Apple’s 14% revenue drop last quarter missed expectations, shares still rallied over 5% on February 1st. Investors cheered the company’s projection of up to 11% sales growth in the March quarter. Apple CFO Luca Maesti predicted “all-time revenue records across wearables, home and accessories, and services.”

Apple’s guidance relied on a stabilizing China market and continued consumer enthusiasm for new products like the MacBook Air M2. Whether Apple hits these targets will depend partly on avoiding COVID shutdowns at key supplier Foxconn plants in Zhengzhou.

More broadly, much uncertainty still swirls around the 2023 economy. But Apple enters the year in an enviable financial position, flush with over $170 billion in cash. This fortress balance sheet offers resilience if consumers tighten belts.

While iPhone sales show signs of maturity, Apple’s expanding services ecosystem and forays into areas like self-driving cars suggest room for continued innovation and leadership. With shares still down 15% over the past year, many analysts call Apple stock a relative safe haven amidst wider market volatility.




AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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