Apple is projecting sales of $76 billion to $78 billion for the last three months of 2016, compared with analysts’ average estimate of $75.4 billion, after reporting its first annual sales decline since 2001.
The tepid holiday season forecast further rattled investors already spooked by competition and saturation in the global smartphone market, sending Apple shares down as much as 3.1% in extended trading. “There was expectation for better guidance in the context that [rival] Samsung isn’t doing so well and these guys should be winning market share,” Abhey Lamba, an analyst at Mizuho Securities, told Bloomberg.
Apple on Tuesday posted fiscal fourth quarter revenues of $46.9 billion, slipping 8.93% year over year. iPhone sales totaled 45.5 million units, more than the 44.8 million expected but down 5% from 48.04 million in the year-ago period.
The fiscal fourth quarter saw Apple essentially treading water, in part because it hasn’t wowed consumers with innovative products. Sales in China alone were down 30% from a year earlier. Sales of services like Apple Pay, the App Store and Apple Music were a bright spot, however, rising 24% over year-ago figures.
“The change in Apple’s fortunes is partly down to the fact that it is no longer firing on all cylinders,” retail analyst Neil Saunders, CEO of Conlumino, wrote in an email to Retail Dive. “Previously, Apple was able to rely on strong sales of phones, tablets and computers to drive up revenue and profit across all geographies. This is no longer the case. Tablet sales are in decline. Growth from computers, which are long overdue a refresh, is weak. And consumers in some markets are saturated with product which makes growth much more difficult to attain. The latter is exacerbated by the fact that new releases, such as the iPhone 7, have been iterative rather than innovative.”
Still, Saunders said, Apple and its investors have set a high bar, and the company is expected to correct many of its missteps — like purchasing complexities for the iPhone 7 that are irritating customers — and is likely to unveil an innovative product or an iPhone version that does impress consumers.
“Even with the dips in growth it remains a phenomenally successful business that is far from running out of steam,” Saunders wrote. “That said, there is a complexity creeping into the firm that runs counter to Apple’s underlying philosophy of simplicity.”
In a conference call with analysts Tuesday, Apple CEO Tim Cook said that more Android users than ever had switched to iPhone in the quarter. He also touted Apple's record growth in services, and insisted that the company is “bullish” on China.
“We have the strongest [product] pipeline that we've ever had and we're really confident about the things in it,” Cook added. “But as usual, we're not going to talk about what's ahead.”
This story is part of our ongoing coverage of the 2016 holiday shopping season. You can browse our holiday page for more stories.