Apple: Third quarter of declining sales but new highs in China, India

• The revenue from China for Apple beat expectations while sales of iPhones in India surged.
• Services revenue reaches a new all-time high.
• Apple posted its third quarter of declining sales due to an industry-wide slump that impacted demand for phones, computers, and tablets.

Apple is facing its most prolonged sales slowdown in decades, leading to another disappointing quarterly check-in. But amidst all the gloom and doom, there are some bright spots for the world’s most valuable company – its revenue growth in China and record iPhone sales in India. Those were the milestones in Apple’s recently unveiled third fiscal quarter results.

For Apple, it is the third straight quarter of declining sales, and the company doesn’t see an end, at least for the current period. An additional drop for the current quarter would mark the longest streak of declines in two decades — a startling slowdown for the Cupertino-based tech giant.

Disappointing demand drags iPhone, iPad sales down

Apple reported a revenue decline of 1.4% to US$81.8 billion in its fiscal third quarter, and according to the tech giant, it was boosted by record-setting services sales. Unfortunately, iPhone demand was weaker than predicted. “The environment is challenging,” Daniel Flax, a senior research analyst at Neuberger Berman, said in an interview with Scarlet Fu on Bloomberg Television. 

“Consumers face pressure from general interest rates, higher inflation. There are a lot of cross-currents that Apple, like many other companies, cannot outrun,” Flax added. Sales of the iPhone, Apple’s biggest moneymaker, slipped 2.4% to US$39.7 billion in the third quarter. The iPad also suffered a sales decline of 20% last quarter. That business generated US$5.79 billion versus calls for about US$6.33 billion. 

Apple saw bright spots in China, India, and its Services segment

In a statement by Apple, CEO Tim Cook also shared that the company recorded an all-time revenue record in Services during the June quarter, driven by over one billion paid subscriptions. Apple’s services revenue business — which includes Apple Music and Apple TV+ — has been an increasingly important revenue driver for Apple. It reached a new all-time high of US$21.2 billion last quarter.

Cook also highlighted that Apple saw continued strength in emerging markets “thanks to robust sales of iPhone.” The performance in greater China for Apple, including Hong Kong, Taiwan, and the mainland, was another highlight. In a conference call, Chief Financial Officer Luca Maestri said wearables — including the Apple Watch and AirPods — did exceptionally well in the country. The iPhone also held up in China, serving as “the heart of our results there,” Cook added.

Overall, sales in the region grew 8% from the year-earlier period to US$15.76 billion after slipping last quarter. It’s Apple’s third largest sales region and Cook said he’s seeing “definite acceleration.” iPhone sales in India also grew substantially – double-digits – to a new high. Apple executives, however, didn’t disclose precise numbers.

The Indian performance also vindicates the company’s renewed focus on a market where the iPhone has long been beyond the reach of many consumers. In recent years, Apple began viewing the fast-expanding country as a massive retail opportunity and a substantial production base for its gadgets in the longer term.

Reports indicated that Cook, who presided over the opening of Apple’s first two Indian retail outlets last month, joined his executives in mentioning India roughly 20 times during the conference call with analysts after unveiling earnings. Though the company did not mention Indian revenue in its earnings statements, reports earlier noted that the iPhone maker posted almost US$6 billion of sales in the country through March.

“It was quite a good quarter for us. India is a fascinating market. It’s a major focus for us. I was just there, and the dynamism in the market, the vibrancy is unbelievable,” he told analysts. “Over time, we’ve been expanding our operations there to serve more customers, and three years ago, we launched the Apple Store online, and then… we launched two stores just a few weeks ago, and they’re off to a great start, one in Mumbai and one in Delhi.”

Cook also reckoned India is “at a tipping point.” Apple has also recently made inroads into the Indian market through refurbished devices. Data from Counterpoint Research, a technology market research firm, signposts an 11% share for refurbished iPhones in 2022, up from 3% the previous year.

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