Citing manufacturing disruptions in China and a softening economy that hurt iPhone sales, Apple (NASDAQ:AAPL) reported its worst December quarter performance in four years on Thursday.
Exposing cracks in what has been one of tech's most resilient companies, the iPhone maker's revenue fell 5.5% to $117.2 billion in its busiest sales period, well below estimates of $121.4 billion.
Apple shares dropped as much as 5.6% in late trading following the report. However, the stock briefly rallied after Chief Executive Officer Tim Cook discussed a rebound in China and that Apple's production problems had subsided.
"Production is now back where we want it to be," he said.
Dragged down by a broader slump afflicting mobile devices and computers, the iPhone and Mac were particularly troublesome segments for Apple last quarter.
Cook said the lockdowns in China created a dual challenge compromising supply and demand, which resulted in greater China sales falling 7% to $23.9 billion.
On top of supply chain issues, the strong US dollar also hurt Apple, with the company warning investors that such foreign-exchange challenges would put an 8% drag on sales, less than the 10% it previously anticipated.
Sales of the company's flagship Mac computers declined 29% year-over-year to $7.7 billion, compared to analyst estimates of $9.6 billion.
More positively, iPad revenue grew 30% to $9.4 billion, but the wearable and accessories segment, including the Apple Watch and AirPods, is still struggling. As a result, sales in the division fell 8% to $13.5 billion.
In the company's services business, which includes the App store and streaming services, sales rose 6% to $20.8 billion in the December quarter, with Cook aiming to bolster the services unit to strengthen the company's earnings potential beyond iPhone sales.
Reaching a "significant milestone," Apple said Thursday, it now has 2 billion active devices with strong international growth, including Brazil, India, Indonesia, Thailand, and Vietnam.
As the technology giant continues the approach it adopted at the start of the COVID-19 pandemic, Apple didn't provide a detailed outlook for the second quarter but laid out some expectations.
Apple said the March quarter performance would mirror fiscal Q1, initiating a revenue decline of about 5%, compared with $97.3 billion a year earlier.
The results came a day after Facebook parent Meta Platforms Inc. (NASDAQ:META) issued results and guidance that gave the stock its biggest single-day gain, up 23%, in nearly a decade.
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