Apple is the latest tech giant to report economic struggles, which have been rippling across the industry.
Tech companies were already huge before the COVID-19 pandemic began upending lives around the world three years ago. And they continued to grow as we became ever more reliant on our smartphones, computers and videoconference calls.
Now Apple is the latest tech giant to signal that this period of growth may be coming to an end.
The company reported that sales of its most important product, the iPhone, fell more than 8%, to nearly $65.8 billion. The reason, Apple said, included several factors, such as the fluctuating price of the US dollar across the world and especially strong sales of its products in the prior year. But the real crunch came from COVID-19 shutdowns late last year across the Chinese manufacturing centers Apple relies on. The results led to protests in China, and supply shortages for Apple's iPhones, in particular its $999 iPhone 14 Pro series.
Apple CEO Tim Cook said many of those manufacturing problems have been resolved, for now.
All told, Apple said it notched profits of nearly $30 billion, down 13% from the same period last year. That translates to $1.88 per share in profit, from nearly $117.2 billion in overall revenue, which itself was down more than 5% from the $123.9 billion reported last year. It also fell short of average analyst estimates, which were $1.94 per share in profits on $121.1 billion in revenue, according to surveys published by Yahoo Finance.
"I'm proud of the way we have navigated circumstances seen and unforeseen over the past several years," Cook said on a conference call after the company's financial report Thursday. "I remain incredibly confident in our team and our mission and in the work we do every day."
Investors appeared to take the report in stride, pushing Apple's stock up 4%, to $156.75 per share early Friday. Last year, investors boosted the company's shares above $3 trillion for a short period, and though Apple's value has fallen to about $2.5 trillion, it's still the most highly valued company in the world.
Apple's financial disclosures, covering the three months of its first fiscal quarter ending in December, are the latest in a constellation of reports that increasingly give a picture of how the tech world is faring through this period of economic uncertainty. Tech's biggest giants have raised alarms of a rough patch after years of seemingly unstoppable growth during the pandemic. Apple in particular reported all-time record revenue and profits this time last year, after its iPhone 13 was a hit of the 2021 holiday shopping season.
But a mix of continued parts shortages, COVID lockdowns in China's manufacturing centers, and people pulling back spending over fears of a recession have knocked many tech companies for a loop. Amazon, Facebook parent Meta and Google parent Alphabet have all gone through dramatic layoffs, citing falling advertising revenue. Other companies, such as Microsoft, also instituted layoffs.
Apple, for its part, has frozen hiring in some areas, and Cook has volunteered to reduce his potential future compensation.
One reason for that approach could be that Apple's iPhone division wasn't the only product segment facing challenges. Its Mac computer team, including its MacBook laptops, reported that sales fell nearly 29%, to $7.7 billion. The company's wearables and accessories business also notched sales that dropped, more than 8%, to about $13.5 billion, despite Apple having introduced a new extreme sports-focused $799 Apple Watch Ultra and revamped second-generation AirPods Pro earbuds.
Still, Cook tried to maintain a positive tone, saying the company is "focused on the long term." He also noted that the company tallied more than 2 billion active devices across all its product categories, a new "all-time-high."
"We are excited about the year to come," he told analysts. "At Apple we are always looking forward, always focused on the next challenge."