Apple Shares Slide After Q1 Miss Amid Weak iPhone Sales; Installed Active Devices Cross 2B Mark

Apple, Inc. AAPL reported first-quarter earnings and revenue that missed expectations. iPhone revenue trailed forecasts, while strength in Services and iPad helped offset some of the weakness.

How Apple Did On Key Q1 Metrics: Cupertino, California-based Apple reported first-quarter earnings per share of $1.88, missing the consensus estimate of $1.94 per share and declining from the year-ago EPS of $2.01.

Apple’s top line fell 5% year-over-year to $117.2 billion, missing the consensus estimate of $121.1 billion.

The December quarter, which is Apple’s fiscal first quarter, is also its busiest and seasonally strong quarter. Expectations were muted this time around.

On the fourth-quarter earnings call held in late October, CFO Luca Maestri said the year-over-year growth in revenue would slow down in the December quarter. He flagged a 10-percentage-point impact from an adverse currency effect, macroeconomic challenges slowing Service sector revenue growth and a substantial decline in Mac revenue due to tougher comparisons.

The first quarter of 2022 benefited from the launch and associated fill of the newly redesigned MacBook Pro with M1 chips. The dollar has weakened since then, amid the Fed’s normalization of rates.

“During the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base,” said Apple CEO Tim Cook.

Margin Profile: Gross margin came in at 42.96%, in line with the company’s guidance of 42.5%-43.5%. This compares to the preceding quarter’s 42.26% and the year-ago quarter’s 43.76%.

Unlike its tech peers, Apple has not announced any massive layoffs. Wedbush’s Daniel Ives said the company is unlikely to announce large-scale eliminations, as the company is in a unique position to withstand the economic storm.

See also: Everything You Need To Know About Apple Stock

Apple's Revenue By Product, Geography: iPhone revenue fell 8.17% year-over-year to $65.78 billion, which trailed the $68.9 billion forecast by Morgan Stanley analyst Erik Woodring. He modeled shipments of $75.5 million units and an average selling price of $916.

In October, the company’s supply chain partner Hon Hai Precision Manufacturing Company Limited HNHPF had to shutter its main iPhone assembly plant in Zhengzhou, China. Apple came back in early November and said the facility was operating at significantly reduced capacity, on account of which its iPhone 14 Pro and iPhone 14 Pro Max shipments would be lower than it previously anticipated.

“In spite of a difficult macroeconomic environment and significant supply constraints, we grew total company revenue on a constant currency basis,” said Maestri.

The Services business, which leverages the company’s huge installed base of active devices, rose 6.4% year-over-year to $20.77 billion, representing a record.

iPad revenue jumped 29.64% to $9.4 billion, while Mac revenue fell 28.72% to $7.74 billion. Morgan Stanley’s Woodring had estimated iPad and Mac revenues of $8.5 billion and $9 billion, respectively.

Wearables, Home and Accessories revenue fell 8.29% to $13.48 billion.

Geographically, Apple saw year-over-year declines in all regions. Americas, which fetched roughly 42% of the total revenue, saw a revenue decline of 4.31% to $49.28 billion. Greater China revenue fell 7.28% to $23.91 billion.

Apple Shareholder Returns: Apple said it returned over $25 billion to shareholders during the quarter, while also investing in long-term growth plans.

The company’s board declared a dividend of 23 cents per share, payable on Feb. 16 to shareholders of record as on Feb. 13.

AAPL Price Action: Apple’s stock hit an all-time high of $182.94 in early January 2022 before pulling back sharply through the year. The low point of the year was $125.87, hit in late December. The stock lost 26.41% for the year, not as bad as the Nasdaq Composite’s 33% plunge.

Apple stock has recovered along with the broader market this year. Year-to-date, the stock has gained 11.93%.

The average analyst 12-month price target for Apple is $173.44, according to TipRanks, suggesting potential for 19.26% upside.

Following the earnings release, the stock was down 4.02% to $144.75 in after-hours trading, according to Benzinga Pro data.

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