Apple's iPhone sales in the first quarter fell short of expectations, with sales in the Chinese market declining by 11.1% year-on-year

According to the Zhitong Finance APP, after the close of the U.S. stock market on Thursday, Apple (AAPL.US) announced its financial report for the first quarter of fiscal year 2024 (ending December 28). Although overall revenue increased by 4% year-on-year, iPhone sales fell short of Wall Street expectations, with sales in the Chinese market declining by 11.1% year-on-year. As a result, Apple's stock price remained basically flat in after-hours trading.

The specific data shows that Apple's Q1 earnings per share were $2.40, higher than the market expectation of $2.35; total revenue was $124.3 billion, slightly above the market expectation of $124.12 billion; iPhone revenue was $69.14 billion, below the market expectation of $71.03 billion; Mac revenue was $8.99 billion, higher than the market expectation of $7.96 billion; iPad revenue was $8.09 billion, higher than the market expectation of $7.32 billion; other products revenue was $11.75 billion, slightly below the market expectation of $12.01 billion; service revenue was $26.34 billion, higher than the market expectation of $26.09 billion; gross margin was 46.9%, above the market expectation of 46.5%.

Despite overall sales growth, iPhone revenue did not meet market expectations and showed a slight year-on-year decline. This quarter marked the first full fiscal quarter since the launch of the iPhone 16 series, and Apple also introduced the Apple Intelligence AI suite, but it failed to drive stronger iPhone sales growth.

In this quarter, Apple's iPhone sales were $69.14 billion, approximately $1.9 billion lower than the market expectation of $71.03 billion. This is the largest instance of iPhone sales performance falling short of market expectations since the first quarter of fiscal year 2023. At that time, Apple attributed the supply shortage of the iPhone 14 to production issues in China. This quarter, Apple's revenue in the Greater China region fell to $18.51 billion, a year-on-year decline of 11.1%. This marks the second consecutive year of double-digit year-on-year sales decline in the Greater China region, following a 12.9% drop in the same period last year.

Apple CEO Tim Cook stated in a media interview that iPhone sales performed stronger in markets where Apple Intelligence has already been launched. Currently, the software is only available in a few English-speaking countries and has not yet been launched in the Chinese market.

Cook pointed out that the performance in the Greater China region was affected by three main factors: channel inventory adjustments accounted for about half of the sales decline, Apple Intelligence has not yet been launched in China, and the Chinese government released a new national subsidy policy after the end of the fiscal quarter, which is expected to stimulate sales of some Apple products. He added that if we look at the 11.1% decline, about half of it is due to channel inventory changes, so the actual operational performance is somewhat better.

Driven by the holiday shopping season, sales of Mac and iPad saw strong growth, reversing the sluggish performance of the same period last year. Mac business revenue grew by 15%, reaching $8.98 billion, the highest growth rate since the fourth quarter of fiscal year 2022. iPad revenue grew by 15%, reaching $8.08 billion. Apple launched new iMac, Mac Mini, and MacBook Pro models this quarter and released a new iPad Mini in October Cook stated that the launch of new products significantly boosted sales growth for Mac and iPad.

Meanwhile, Apple's services business continues to grow steadily, with revenue increasing by 14% year-on-year to USD 26.34 billion, setting a new record. Cook revealed that Apple currently has over 1 billion subscription services, which include its own subscription services such as Apple TV+, iCloud, and third-party applications subscribed through the App Store system. In addition, the company announced a dividend of USD 0.25 per share