Apple Delivers a Lackluster Performance

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Earlier this month, Apple (Nasdaq: AAPL) announced its fourth quarter results that failed to truly impress the market. Its sales fell for the fourth consecutive quarter. Its stock fell 3% in the after-hours trading session after Apple suggested that it may not return to growth in the holiday quarter.

Apple’s Financials

Apple’s fourth quarter revenues fell 1% to $89.5 billion, ahead of the market’s forecast of $89.3 billion. EPS of $1.46, was also ahead of the Street’s forecast of $1.39.

By segment, iPhone revenues grew 2% to $43.81 billion, and were in line with the market’s estimates. Mac sales fell 34% to $7.61 billion missing the Street’s estimates of $8.63 billion. iPad sales fell 10% to $6.44 billion but were ahead of the market’s forecast of $6.07 billion. Revenues from Wearables also fell 3% to $9.32 billion, compared with the market’s forecast of $9.43 billion. The services segment revenues grew 16% to $22.31 billion, soaring past the market’s estimates of $21.35 billion.

Apple did not provide any outlook for the current quarter but suggested that it may be a flat quarter. The market estimates revenues of $122.98 billion in revenue for the December quarter.

Apple’s Product Growth

Apple believes that poor Mac sales were due to challenging market conditions and difficult comparisons against the supply disruptions and subsequent demand recapture that they saw a year ago. They expect Mac sales to pick up as they recently unveiled the next generation of Apple silicon with its M3 chips – M3, M3 Pro, and M3 Max. The chip will provide Pro users with some of the most advanced technology in MacBook Pro.

Last quarter, Apple also released its latest iPhone – iPhone 15 and iPhone 15 Plus. The phones introduce updated photo capabilities and are leveraging Apple’s satellite infrastructure to offer Roadside Assistance via satellite to connect users to AAA. It comes with A16 Bionic for powerful performance, a USB-C connector, Precision Finding for Find My friends, and additional durability features. It hasn’t had a full quarter of sales for the new model, but Apple announced that it is seeing stronger demand for the phone compared to what it had witnessed for iPhone 14.

The biggest growth though continues to be registered by its Services segment which set a record of revenues in the quarter. Apple achieved the record across the board in App Store, advertising, AppleCare, iCloud, payment services, video, and Apple Music. It continues to lure subscribers through new content that includes new and returning shows like the Morning Show, Lessons in Chemistry, and Monarch. It is creating inspirational content and recently produced Martin Scorsese’s Killers of the Flower Moon, that premiered in theaters last month.

Apple is also helping its developer community. It recently introduced Meet with Apple Experts, a new global resource for the Apple developer community that allows them to find and participate in sessions, workshops, labs, and one-on-one consultations to learn about Apple’s latest tools and resources. With more than 50 such sessions available already, Meet with Apple Experts will include ongoing access to both online and in-person activities to provide developers with more opportunities to connect directly with Apple experts for insight, support, and feedback. Several sessions will focus on helping developers maximize their app and game experiences on the App Store through customizing product pages, enhancing app discovery, and improving customer acquisition through features like App Analytics.

Apple’s stock is trading at $184.62 with a market capitalization of $2.9 trillion. It touched a 52-week high of $198.23 in July. The stock was trading at a 52-week low of $124.17 in January.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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Photo credit: Lydia Fizz/Flickr.com.