Apple’s shares surge despite iPhone revenue miss and China struggles

Phone sales accounted for more than 55% of the company’s total revenue in the holiday quarter

An Apple store in the Nanjing East Road shopping area during Lunar New Year holidays in Shanghai, China, on January 30. Bloomberg

Apple’s shares jumped in after-market trading on Thursday despite the company reporting a decline in iPhone sales and a double-digit drop in its China market revenue in the last quarter.

The California-based company earned more than $69.1 billion in revenue from iPhone sales during the October-December period, falling short of analysts' expectations of more than $71 billion. It was nearly $564 million less than in the same period of 2023.

Apple's iPhones accounted for nearly 55.6 per cent of the company's total revenue in the last quarter. The December quarter marked the first full sales period for the company’s latest iPhone 16 series smartphones, during which Apple also introduced its in-house Apple Intelligence AI suite for the devices.

Apple's phone sales fell short of analysts' expectations by the widest margin in two years, since its fiscal first-quarter earnings report in 2023. Back then, the company attributed the shortfall to production disruptions in China, which limited the supply of iPhone 14s.

With a 23.2 per cent global market share, Apple sold 76.9 million iPhones on December quarter, a yearly drop of nearly 4 per cent, according to US market researcher International Data Corporation. It was followed by Samsung (15.6 per cent), Xiaomi (12.9 per cent) and Vivo (8.2 per cent).

After the announcement, Apple stock dropped 1.39 per cent to trade at $234.29 a share in after-hours trading on Thursday. But it rebounded to trade 3.32 per cent up at $245.47. It closed 0.74 per cent down at $237.59, giving the company a market valuation of $3.57 trillion. Its stock has dropped 2.57 per cent since the start of the year.

Apple chief executive Tim Cook while attending the inauguration ceremony before Donald Trump is sworn in as the 47th US President. Reuters

Apple's revenue during the three-month period that ended on December 30 jumped 4 per cent to $124.3 billion, exceeding analysts estimates of $124.1 billion. It was the company's record for quarterly sales.

Net profit during the holiday quarter jumped 7.1 per cent on a yearly basis to more than $36.3 billion. Earnings per share surged to $2.40 against the expectation of $2.35.

The company’s total revenue from its services division grew nearly 14 per cent annually to almost $26.3 billion, while revenue from wearables, and home and accessories products dropped 1.7 per cent annually to more than $11.7 billion. Revenue from iPads and computers increased 15.3 per cent to pass $17 billion.

“We are unlocking new possibilities for our users with Apple Intelligence, which makes apps and experiences even better and more personal … and we are excited that Apple Intelligence will be available in even more languages this April," said Tim Cook, Apple’s chief executive.

Apple is expecting “low to mid-single digits” sales growth in the current quarter on a yearly basis. In the services division, which has emerged as one of the most profitable units in the past quarters, Apple predicts a growth of “low double digits”.

The company said that the strong dollar is expected to elevate its total sales by nearly 2.5 per cent.

Apple store in Shanghai. AFP

Growing challenges in China

The company’s overall sales, which include revenue from products and services, in the Greater China market (China, Hong Kong, Macau and Taiwan) dropped more than 11 per cent on annual basis to over $18.5 billion in the previous quarter. But it jumped 23.3 per cent on a quarterly basis driven by the sale of new iPhones and Apple watch in October and December.

Apple faced stiff competition in China from local brands such as Huawei, Vivo and Xiaomi.

Mr Cook told CNBC that iPhone sales were stronger in countries where Apple Intelligence is available. The software is limited to a few English-speaking countries and is not available in China or in Cantonese or Mandarin.

The Americas region led Apple’s sales. It accounted for nearly 42.3 per cent of the company's revenue, with more than $52.6 billion.

It was followed by Europe, which added more than $33.8 billion – up almost 11.4 per cent annually – to the company’s revenue.

Japan and the rest of the Asia Pacific market added nearly $19.3 billion to Apple’s sales, an annual jump of 7.5 per cent.

Apple said its board of directors had declared a cash dividend, payable on February 13, of $0.25 for each share of the company’s common stock.

“Our record revenue and strong operating margins drove EPS [earnings per share] to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders,” said Kevan Parekh, Apple’s chief financial officer.

He said, without disclosing the exact number, that Apple’s active installed base of devices reached an all-time high across all products and all geographic segments in the last quarter.

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  Unlike previous years, only those with online reservations were allowed to queue up outside the Apple store in Dubai Mall. Ali Al Shouk / The National

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  Many travelled from other parts of the region to be among the first to get their hands on the latest iPhone. Ali Al Shouk / The National

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  Apple introduced the iPhone 16, 16 Plus, 16 Pro and 16 Pro Max at an unveiling event this month. Ali Al Shouk / The National

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  Indian expat Sayed Fawas has made a tradition of changing his iPhone at every launch. Ali Al Shouk / The National

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  Several Apple fans were seen waiting for their turn at Yas Mall in Abu Dhabi. The National

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  The UAE is among the first countries where the new devices are available. The National

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  'A reservation is currently required to purchase iPhone 16 and iPhone 16 Pro in store,' Apple informed on its website. The National