Apple's weak iPhone sales drive first profit miss since 2016 - Reuters

Feb 2 (Reuters) - Apple Inc (AAPL.O) connected Thursday reported income and profits that missed Wall Street expectations driven by anemic iPhone income aft COVID lockdowns successful China disrupted accumulation of the company's biggest seller.

Shares of Apple fell 5% aft work of the results.

Apple income fell 5% to $117.2 cardinal and were down successful each portion of the satellite successful the quarter. Sales from each merchandise class dropped, but for gains successful services and iPads. Earnings per stock were $1.88, Apple's archetypal miss of Wall Street's profits expectations since 2016.

Analysts had expected income of $121.1 cardinal and profits of $1.94 per share, according to IBES information from Refinitiv. Apple Chief Executive Tim Cook told Reuters that the accumulation disruptions that plagued Apple's cardinal 4th were present over.

During its fiscal archetypal 4th ended Dec. 31, Apple faced a question of challenges that near Wall Street expecting little sales. Chief among those were proviso concatenation pressures erstwhile COVID lockdowns astatine a production installation successful Zhengzhou, China, slowed accumulation of iPhone 14 Pro and Pro Max devices, some premium priced models that would traditionally assistance thrust Apple's margins higher.

In an interrogation with Reuters, Cook said that accumulation disruptions "lasted done astir of December" but that "production is present backmost wherever we privation it to be." Cook said the lockdowns successful China created a dual situation wherever some proviso and request were constrained, with greater China income falling 7% to $23.9 billion.

"When things started to reopen successful December (in China), we did spot an summation successful postulation to our stores arsenic compared to November and an summation successful request arsenic December rolled around," Cook told Reuters.

The beardown U.S. dollar besides wounded Apple, which derives much than fractional its income from extracurricular the Americas, but the effect was little than anticipated arsenic the dollar eased from past year's highs. Apple had warned investors that specified foreign-exchange issues would enactment a 10% connected resistance connected income but said connected Thursday that the existent effect was 8%.

"I would constituent retired that 8% is inactive a precise terrible headwind," Cook told Reuters. "I wouldn't privation to underestimate that. We would person grown connected a changeless currency basis."

On apical of proviso concatenation problems for the iPhone, Wall Street analysts had expected iPhone income to autumn this twelvemonth arsenic portion of a larger signifier successful which the iPhone 14 household released past twelvemonth sells much dilatory aft 2 consecutive years of beardown income of iPhone 12 and 13 models. Apple said iPhone income were $65.8 billion, down 8% from the twelvemonth earlier and beneath expert estimates of $68.3 billion.

The company's services segment, which includes contented businesses specified arsenic Apple TV+ and bundle concern similar the App Store, roseate 6% to $20.8 cardinal successful revenue, compared with expert expectations of $20.7 billion, according to Refinitiv data.

Cook told Reuters that the institution present has a basal of 2 cardinal progressive devices, up from 1.8 cardinal a twelvemonth ago. The institution present has 935 cardinal paid subscriptions, up from 900 cardinal the 4th before, and that services income acceptable a grounds successful respective markets, including China, helium said.

Sales of the company's Mac computers, which had boomed during the question of moving from location during the pandemic, declined 29% twelvemonth implicit twelvemonth to $7.7 billion, compared with expectations of $9.6 billion, according to Refinitiv data. Apple executives had warned past twelvemonth that Mac income were apt to diminution twelvemonth implicit twelvemonth due to the fact that the erstwhile year's results included a burst of income associated with the merchandise of new MacBook Pro computers with Apple's house-designed processors.

Sales of the iPad, which besides saw a pandemic-related boost, grew 30% to $9.4 billion, compared with expert expectations of $7.8 billion, according to Refinitiv data. The wearable and accessories segment, which includes the Apple Watch and AirPods, fell 8% to $13.5 cardinal compared with expert estimates of $15.2 billion, according to Refinitiv data.

Cook told Reuters the iPad's beardown show stemmed from the motorboat of caller models and the lack of proviso constraints that had hindered income of the instrumentality a twelvemonth earlier.

Apple investors are waiting to spot whether the institution dives into caller markets this year. Technology work The Information has reported that Apple plans to motorboat a mixed-reality headset that could retail for astir $3,000 this twelvemonth and is besides moving connected a much affordable follow-up device.

Apple is 1 of the fewer ample exertion firms that has not announced large layoffs, though its ranks ne'er grew arsenic rapidly arsenic that of its peers. In precocious 2022 it said it had 164,000 employees, up little than 20% from its 2019 headcount. By contrast, different companies specified arsenic Meta Platforms Inc (META.O), which is laying disconnected astir 11,000 employees, had astir doubled its headcount betwixt 2019 and 2022.

Reporting by Stephen Nellis successful San Francisco; Additional reporting by Akash Sriram successful Bengaluru; Editing by Peter Henderson and Lisa Shumaker

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