Apple holiday forecast disappoints on iPad, wearables demand; shares slip

Apple on Thursday gave a sales forecast for the holiday quarter that missed Wall Street expectations, hurt by weak demand for iPads and wearables, sending its shares down about 3 per cent in after-hours trading.

Chief Executive Tim Cook insisted that the company's new iPhone 15 models were doing well in China, seeking to ease Wall Street worries that Apple was losing market share to a resurgent Huawei and other local smartphone sellers. Apple's revenue from China dipped 2.5 per cent overall in the fiscal fourth quarter ended Sept. 30, though Cook said it grew after accounting for foreign-exchange rates.

Chief Financial Officer Luca Maestri told analysts on a conference call that sales for the current quarter, which includes the Christmas holidays and when Apple typically has its biggest sales of new iPhone models, will be similar to the previous year. Wall Street had expected a forecast for a rise in sales of 4.97 per cent to $122.98 billion.

Apple shares, which have risen 37 per cent so far this year, dropped 3.4 per cent after-hours, following the forecast.

Maestri said Apple expects to have higher iPhone sales for the fiscal first quarter, even though this year's holiday quarter has one fewer week of sales than the year-ago.

"I’d say it was surprising to see how confident Tim Cook was on future China performance given the many potential geopolitical challenges that we know exist for that market," said Bob O'Donnell, chief analyst at TECHnalysis Research.

Apple on Thursday reported sales and profit for the fiscal fourth quarter that beat Wall Street expectations, helped by an uptick in iPhone sales and a $1 billion boost to services revenue that offset large drops in Mac and iPad sales.

Cook said the company's new high-end handset models - the iPhone 15 Pro and Pro Max devices - are facing supply constraints.

The Cupertino, California-based company has navigated a global smartphone slump better than many of its rivals, but faces an uneven economic recovery in China, a key market.

"While we believe investors should breathe a sigh of relief because sales and profits both exceeded expectations, the upside was small and we were concerned to see weak sales from China," DA Davidson analyst Tom Forte said.

Apple said sales for the most recent quarter fell roughly 1 per cent to $89.50 billion, but beat analyst estimates of $89.28 billion, according to LSEG data. Net income rose about 11 per cent. Profit per share of $1.46 beat analyst expectations of $1.39 per share, according to LSEG.

Apple is facing tougher competition in the smartphone market this year as Huawei Technologies (HWT.UL) returns to the field with new phones powered by Chinese-made chips after being all but shut out of the market for several years by U.S. government trade curbs.

Apple's sales in China fell to $15.08 billion from $15.47 billion in the fourth quarter a year ago. Cook said that after accounting for foreign-exchange rates, Apple's business in China grew year-over-year, driven by iPhone sales and services revenue.

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

Cook said Apple was "working hard to manufacture more" iPhone 15 Pro and Pro Max devices. "We do believe that later this quarter, we'll 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 further improve in (Apple's fiscal first quarter) as the supply issues of the top Pro and Pro Max models will be resolved by then," said IDC analyst Nabila Popal. "Demand across regions continues to show preference for the most premium models, and we expect an even larger proportion" of those models this year than last year, she said.

The personal computer market is also expected to fare better in the coming year. Earlier this week, Apple rolled out new Mac machines.

Still, Mac sales slumped by a third to $7.61 billion and iPad sales declined 10 per cent to $6.44 billion, compared with 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 per cent to $9.32 billion, short of estimates of $9.43 billion, according to LSEG data.

Apple has faced several quarters of declining sales of Macs and iPads, and the fourth quarter continued that trend.

Sales in Apple's services segment, which includes Apple TV+ and which recently closed a deal with global soccer superstar Lionel Messi, rose 16 per cent to $22.31 billion, compared with analyst estimates of $21.35 billion.