Apple (AAPL) on Feb. 2 posted an unexpected earnings miss for the three months ended December 2022 as iPhone sales fell more sharply than anticipated. CEO Tim Cook said production delays in China and a difficult economy both contributed to the disappointing financial results, but he assured shareholders the worst is behind Apple and future earnings should be more predictable.
Apple shares fell 3 percent immediately after the earnings release and then rebounded following Cook’s call with analysts. Apple stock jumped 3 percent today (Feb. 3) to $155.8 per share.
For the quarter, Apple posted a net profit of $30 billion, or $1.88 per share, on $117.2 billion in revenue, down 5 percent from a year ago. Analysts had expected a $1.94 earnings per share on $121.2 billion of revenue. It was Apple’s first revenue decline since 2019 and the first earnings miss in seven years.
iPhone sales, which accounted for more than half of Apple’s revenue, fell 8 percent from the same period last year.
Cook said the revenue decline was a result of three factors: a strong dollar, production issues in China affecting the supply of the new iPhone 14 lineup, and the overall macroeconomic environment.
In early November, Apple issued a rare warning about its supply chain in China, where Covid-related lockdowns and protests at factories owned by Apple’s suppliers severely disrupted production.
Dwindling iPhone supplies due to supply chain disruptions
The impact lasted through most of December, Cook said on a call with analysts. "Because of these constraints, we had significantly less iPhone 14 Pro and iPhone 14 Pro Max supply than we planned, causing ship times to extend far beyond what we had anticipated."
Apple makes more than 90 percent of its devices in China. Last year, it began moving part of the iPhone production to India to mitigate risks. "In terms of going forward in the supply chain, we build our products everywhere," Cook said. "There are component parts coming from many different countries in the world, and the final assembly coming from three countries in the world on just iPhone."
He assured investors production is back to where Apple needs it to be. "So the problem is behind us," he said.
Cook added Apple's holiday sales was also affected by a challenging macroeconomic environment marked by high inflation, the war in Ukraine and the enduring impacts of the pandemic. "Apple is not immune to it. But whatever conditions we face, our approach is always the same," he said.
There was no mention of layoffs, a topic concerning many analysts as other big tech companies cut headcount by the thousands recently. But CFO Luca Maestri said Apple is cutting costs and has slowed hiring.
Apple didn't provide specific revenue guidance for the current quarter ending March 31. Maestri said device sales would have a similar declining trend as the December quarter, whereas service revenue is expected to grow.