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After COVID lockdowns in China interrupted production of the company’s top seller, Apple on Thursday revealed sales and earnings that fell short of Wall Street projections. The reason for the disappointing results was the iPhone’s dismal sales.

Apple’s quarterly sales were down throughout the world, falling 5% to $117.2 billion. Except for services and iPads, all product categories saw a decline in sales. Apple’s earnings per share came in at $1.88, below Wall Street’s profit forecasts for the first time since 2016.

According to IBES statistics from Refinitiv, analysts had projected sales of $121.1 billion and earnings of $1.94 per share. According to Apple Chief Executive Tim Cook, the production hiccups that marred Apple’s crucial quarter are finally gone.

Apple had a wave of difficulties during its fiscal first quarter, which concluded on December 31, leading Wall Street to anticipate weaker sales. The manufacture of the iPhone 14 Pro and Pro Max, two high-end models that would typically assist raise Apple’s profits, was held down as a result of COVID lockdowns at a manufacturing plant in Zhengzhou, China. This put strain on the supply chain.

Cook stated that manufacturing hiccups “lasted through most of December” but that “production is now back where we want it to be” in an interview with Reuters. The larger China sales fell 7% to $23.9 billion as a result of the lockdowns in China, according to Cook, creating a twin problem where both supply and demand were restrained.

“We did observe an increase in traffic to our stores as opposed to November and an increase in demand as December came around,” Cook told Reuters when things started to reopen in China.

Apple, which receives more than half of its sales from outside the Americas, was also harmed by the strong US dollar, although the impact was less than anticipated as the dollar fell off its highs of the previous year. Apple stated on Thursday that the real impact was just 8% despite having previously warned investors that such foreign exchange problems would have a 10% negative impact on sales.

Cook told Reuters, “I would point out that 8% is still a pretty substantial headwind. “That is not something I want to undervalue. If we had expanded at a fixed rate of exchange.”

Wall Street experts had predicted that iPhone sales would decline this year in addition to supply chain issues, as part of a bigger trend in which the iPhone 14 family debuted last year sells more slowly following two consecutive years of robust sales of iPhone 12 and 13 models. Apple reported iPhone sales of $65.8 billion, which were lower than expert expectations of $68.3 billion and down 8% from the prior year.

According to Refinitiv statistics, the company’s services division, which includes software and entertainment companies like the App Store and Apple TV+, had a 6% increase in sales to $20.8 billion, above analyst projections of $20.7 billion.

Cook told Reuters that the number of active devices in the company’s base has increased from 1.8 billion to 2 billion since last year. With 935 million paid subscribers today, up from 900 million the previous quarter, the corporation has had record-breaking service sales in a number of locations, including China.

According to Refinitiv statistics, sales of the company’s Mac computers, which had soared during the surge of people working from home during the epidemic, fell 29% year over year to $7.7 billion, vs forecasts of $9.6 billion. The advent of new MacBook Pro laptops using Apple’s own CPUs in the prior year resulted in a spike in sales, which led Apple officials to issue a warning that Mac sales would likely decrease year over year.

According to Refinitiv statistics, sales of the iPad, which also benefited from the epidemic, increased 30% to $9.4 billion, above expert projections of $7.8 billion. According to Refinitiv statistics, the wearable and accessories sector, which includes the Apple Watch and AirPods, decreased 8% to $13.5 billion from analyst projections of $15.2 billion.

Cook told Reuters that the debut of new models and the lack of supply limitations, which had hampered sales of the tablet a year earlier, were to blame for the iPad’s outstanding performance.
Apple is one of the few large technology firms that has not announced major layoffs, though its ranks never grew as rapidly as that of its peers. In late 2022 it said it had 164,000 employees, up less than 20% from its 2019 headcount. By contrast, other companies such as Meta Platforms, which is laying off about 11,000 employees, had roughly doubled its headcount between 2019 and 2022.

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