Apple Stock Slides as iPhone Maker Reports Third Consecutive Quarterly Sales Decline

Consumer electronics giant Apple surpassed Wall Street’s expectations for earnings in its fiscal third quarter, while sales met analysts’ forecasts. However, the company’s outlook for the current quarter was disappointing, resulting in a sharp decline in Apple stock on Friday. In the quarter ended July 1, Apple reported earnings of $1.26 per share on sales of $81.8 billion, surpassing FactSet’s consensus estimates of $1.20 per share on sales of the same amount. Despite a 5% year-over-year increase in earnings, sales declined by 1%, marking the third consecutive quarter of sales decline for the Cupertino, Calif.-based company.

Notably, after two consecutive quarters of flat or declining profits, earnings returned to growth. Chief Financial Officer Luca Maestri highlighted the improvement in the June-quarter business performance compared to the March quarter. The company demonstrated strong operating cash flow of $26 billion, returned over $24 billion to shareholders, and remained committed to investing in long-term growth plans.

Apple Stock Slides in Response to Latest Report

Apple’s latest projections for the September quarter indicate a revenue growth similar to that of the June quarter, with a year-over-year decline of 1.4%, despite a smaller foreign-exchange headwind. During midday trades on the stock market, Apple’s stock witnessed a decline of 2.9%, reaching 185.61. In the regular session on Thursday, the stock dipped 0.7%, closing at 191.17. Barclays analyst Tim Long noted that Apple’s management remained cautious due to macro uncertainties during the call with investors. The September-quarter outlook for Apple failed to meet Wall Street’s expectations, signaling four consecutive quarters of revenue declines, a scenario unseen in the last two decades.

Rosenblatt Securities analyst Barton Crockett downgraded Apple stock to neutral from buy, stating that the company is currently in a “slowdown phase.” Crockett believes that Apple needs a new groundbreaking product to drive its growth in the future, citing the mixed-reality headset called “Apple Vision Pro” as a promising candidate, though with a meaningful risk of failure. He also expressed uncertainty about the possibility of an Apple Car. Crockett sees little potential for the iPhone 15 to significantly alter the growth trajectory at this point.

Strong Services Growth Compensates for Declining Hardware Sales

In the June quarter, Apple faced a 4.4% year-over-year decline in hardware sales, amounting to $60.58 billion, while services revenue showed growth, rising 8.2% to $21.21 billion. The iPhone contributed 48% of the company’s total sales but experienced a 2% decline, amounting to $39.67 billion. Sales of Mac computers fell by 7% to $6.84 billion, and iPad tablet sales slid nearly 20% to $5.79 billion. However, there was a positive note with Apple’s wearables, home, and accessories unit experiencing a 2% revenue increase, reaching $8.28 billion in the June quarter.