Apple’s holiday forecast disappoints on iPad, demand for wearables; Stocks slide

Nov 2 (Reuters) – Apple Inc (AAPL.O) on Thursday gave a sales forecast for the holiday quarter that fell short of Wall Street expectations, hurt by weak demand for iPads and wearables, which sent its shares down about 3% in after-hours trading. the job.

CEO Tim Cook insisted that the company’s new iPhone 15 models are performing well in China, seeking to allay Wall Street concerns that Apple was losing market share to a rising Huawei and other local smartphone vendors. Apple’s revenue from China fell 2.5% overall in the fourth fiscal quarter ended September 30, although Cook said it grew after accounting for foreign exchange rates.

Sales for the current quarter, which includes the Christmas holiday and when Apple typically makes its biggest sales of new iPhone models, will be similar to the previous year, Chief Financial Officer Luca Maestri told analysts on a conference call. Wall Street expected sales to rise by 4.97% to $122.98 billion.

Apple shares, which have risen 37% so far this year, fell 3.4% after hours, following expectations.

Maestri said Apple expects iPhone sales to rise in the fiscal first quarter, although this year’s holiday quarter sales are one week fewer than last year.

“I would say it was surprising to see how confident Tim Cook is in China’s future performance given the many potential geopolitical challenges we know exist in this market,” said Bob O’Donnell, senior analyst at TECHnasis Research.

Apple on Thursday reported fiscal fourth-quarter sales and profits that beat Wall Street expectations, helped by an uptick in iPhone sales and a $1 billion increase in services revenue that offset big declines in Mac and iPad sales.

Cook said the company’s new high-end phone models — the iPhone 15 Pro and Pro Max — face supply constraints.

The Cupertino, California-based company has weathered the global smartphone recession better than many of its competitors, but it faces an uneven economic recovery in China, a key market.

“While we think investors should breathe a sigh of relief that sales and earnings beat expectations, the upside was small and we were concerned about seeing weak sales from China,” DA Davidson analyst Tom Forte said.

Apple said its fourth-quarter sales fell about 1% to $89.50 billion, but beat analysts’ estimates of $89.28 billion, according to LSEG data. Net income increased by about 11%. Earnings per share of $1.46 beat analysts’ expectations of $1.39 per share, according to LSEG.

Apple faces tougher competition in the smartphone market this year as Huawei Technologies Co (HWT.UL) returns to the field with new phones powered by Chinese-made chips after being excluded from the market for several years due to trade restrictions imposed by the US government.

Apple’s sales in China fell to $15.08 billion from $15.47 billion in the fourth quarter of last year. After accounting for foreign exchange rates, Apple’s business in China grew year-on-year, driven by revenue from iPhone sales and services, Cook said.

“In mainland China, we set a quarterly record for the September quarter for iPhone,” Cook told Reuters. “We had four of the top five best-selling smartphones in urban China.”

Cook said Apple is “working hard to make more” iPhone 15 Pro and Pro Max devices. “We believe that later this quarter we will reach a supply-demand balance.”

For now, the iPhone remains Apple’s biggest seller. Sales were $43.81 billion in the fourth quarter, in line with analyst expectations, according to LSEG data.

“We expect its performance to improve further in (Apple’s fiscal first quarter) as the supply issues of the top Pro and Pro Max models will be resolved by then,” IDC analyst Nabila Popal said. “Demand across regions continues to show a preference for more premium models, and we expect a larger proportion” of those models this year compared to last year, she said.

The PC market is also expected to perform better next year. Earlier this week, Apple introduced new Macs.

However, Mac sales fell by a third to $7.61 billion, and iPad sales fell 10% to $6.44 billion, compared to expectations of $8.63 billion and $6.07 billion, respectively.

Sales in Apple’s wearables segment, which includes the Apple Watch and AirPods, fell 3% to $9.32 billion, below estimates of $9.43 billion, according to LSEG data.

Apple has faced several quarters of declining Mac and iPad sales, and Q4 continued that trend.

Sales in Apple’s services sector, which includes Apple TV+ and which recently concluded a deal with global soccer star Lionel Messi, rose 16% to $22.31 billion, compared to analysts’ estimates of $21.35 billion.

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