This had not happened for four years, Apple announced a turnover for its first quarter in decline, and even disappointed the expectations of financial analysts, which had not happened in eight years. A misstep caused by the pandemic, China’s policy in the face of Covid and a global economic slowdown.
A cash machine, driven by strong products, an image with unparalleled power of attraction, and exceptional optimization of the production chain. As the global economic downturn has prompted tech giants to lay off en masse, Apple so far seemed to be resisting. The publication of its latest quarterly financial results sounds like a return to reality. It took at least a global economic slowdown, a pandemic and a breakdown of its production lines, due to China’s management of the Covid, to stop Apple’s beautiful mechanics. Proof, for those who still doubted it, Apple is above the fray, but not invulnerable.
Thus, the Cupertino giant announced a 5.5% drop in revenue for the first quarter of its financial year 2023. This is the first drop in revenue for this quarter recorded in four years for Apple, the last dating back to 2019. It is also the first time since 2015 that the American giant has not met the expectations of financial analysts for the end of the year quarter, traditionally the most profitable for Apple thanks to the holidays.
The iPad and services as new heroes
Of the four hardware revenue pillars of the iPhone, iPad, Mac, or the catch-all category that brings together the wearableshousehold products and accessories, only the iPad escaped the decline.
- With a turnover of 9.396 billion dollars, against 7.248 for the same period last year, the tablet grew by just over 29.6%. A good performance, no doubt to be found on the well-built supply side, and progress made by iPadOS to make the tablet an alternative to PCs.
- As for the iPhone, which still accounts for 56% of Apple’s total revenue, it posted 65.775 billion dollars in turnover (CA) against 71.628 for the same quarter the previous year – a drop of a little more than 8%.
- Macs also stumble and drop from 10.852 billion to 7.735, or almost 29% less turnover. It must be said that the first fiscal quarter of 2022 was that of all records for Mac sales, driven in particular by the introduction of the MacBook Pro M1 Pro and M1 Max. The first fiscal quarter of 2023 was not so lucky, as Apple decided to launch its new Macs at the start of the year, a few weeks ago, in the second fiscal quarter. A decision motivated by the desire to occupy the media space, it seems, and perhaps, if not above all, to reinforce the impression of economic recovery when it publishes its second quarter results in just under three month.
But the iPad isn’t the only vertical seeing growth. Another line is progressing, in a lesser way, it is true, that of services. With 20.766 billion dollars (against 19.516 last year for the same period), they show an increase of 6.4%. An improvement which can be explained not by the acquisition of new subscribers, but by the increase in prices that Apple practiced last October.
This weak progression would tend to prove that the growth of services is, despite everything, always linked to the marketing of new products. It is interesting in any case to note that, for this quarter, the services report more than the two historical verticals which are the Macs and the iPads.
Obviously, even if Apple’s results are not as good as usual, they are still totally out of the ordinary. Especially since Apple’s gross margin shows an impressive 42.96%…
An expected misstep
Anyway, this announcement is not a real surprise. Tim Cook had already warned of the financial danger involved. During the presentation of the results, he pointed out various factors to justify this poor performance.
The first is the global economic slowdown, and specifically in China, which is Apple’s third-largest geographic area in terms of revenue. A slowdown largely due to the pandemic.
The second relates to the closures of Chinese factories, also linked to the pandemic. They thus partially paralyzed the production chain of the Californian giant, and also revealed its great dependence on the Middle Empire and its factory cities. This is why for several months Apple has been advancing at a forced pace to relocate all or part of its production forces, to the United States, anecdotally, but also and above all to India. The Indian subcontinent indeed offers a large and educated workforce, two elements necessary for the mass production of complex products. Moreover, Tim Cook did not say anything else when he said that Apple would continue to improve its supply chain. The American giant wants to reduce its spending on China.
Already better?
Nevertheless, it would seem that the resilience of the American group should not be tested any harder. Tim Cook has indeed announced at the financial conference that the first signs of an economic rebound are already appearing in China. While the problems related to the production chain would now be under control. The fact that the iPhone 14 Pro availability issues seem to be resolved tends to prove that these problems are indeed behind us.
The question now is whether the sales that couldn’t be met over the holidays will be driven now or if they were lost to Apple. It also remains to be seen whether the new Macs and the new HomePod introduced in recent weeks will boost Apple’s sales and revenue. But, to do so much, if we have to look to the future, the big question is to know what will be the first mixed reality headset that Apple should launch between spring and the beginning of summer.
