WASHINGTON – Apple Inc reported sales and profits that missed Wall Street expectations driven by weak iPhone sales after COVID lockdowns in China disrupted production of the company’s biggest seller.
Shares of Apple fell 4% after publication of the results.
Amazon.com and Alphabet also fell about 4% after reporting results. All had gained during regular trade.
Apple sales fell 5% to $117.2 billion and were down in every part of the world in the quarter.
Sales from each product category dropped, except for gains in services and iPads. Earnings per share were $1.88, Apple’s first miss of Wall Street’s profits expectations since 2016.
Analysts had expected sales of $121.1 billion and profits of $1.94 per share, according to IBES data from Refinitiv.
Apple Chief Executive Tim Cook told Reuters that the production disruptions that plagued Apple’s key quarter were now over.
During its fiscal first quarter ended Dec. 31, Apple faced a wave of challenges that left Wall Street expecting lower sales.
Chief among those were supply chain pressures when COVID lockdowns at a production facility in Zhengzhou, China, slowed production of iPhone 14 Pro and Pro Max devices, both premium priced models that would traditionally help drive Apple’s margins higher.
In an interview with Reuters, Cook said that production disruptions “lasted through most of December” but that “production is now back where we want it to be.”
Cook said the lockdowns in China created a dual challenge where both supply and demand were constrained, with greater China sales falling 7% to $23.9 billion.
“When things started to reopen in December (in China), we did see an increase in traffic to our stores as compared to November and an increase in demand as December rolled around,” Cook told Reuters.
The strong US dollar also hurt Apple, which derives more than half its sales from outside the Americas, but the effect was less than anticipated as the dollar eased from last year’s highs.
Apple had warned investors that such foreign-exchange issues would put a 10% on drag on sales but said that the actual effect was 8%.
“I would point out that 8% is still a very severe headwind,” Cook told Reuters. “I wouldn’t want to underestimate that. We would have grown on a constant currency basis.”
On top of supply chain problems for the iPhone, Wall Street analysts had expected iPhone sales to fall this year as part of a larger pattern in which the iPhone 14 family released last year sells more slowly after two straight years of strong sales of iPhone 12 and 13 models.
Apple said iPhone sales were $65.8 billion, down 8% from the year before and below analyst estimates of $68.3 billion.
The company’s services segment, which includes content businesses such as Apple TV+ and software business like the App Store, rose 6% to $20.8 billion in revenue, compared with analyst expectations of $20.7 billion, according to Refinitiv data.
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