Apple's AI-enhanced iPhone made a strong start, pushing quarterly sales ahead of Wall Street expectations, but a modest revenue forecast raised questions about whether that momentum will hold over the holiday sales season.
Reuters reports a decline in China sales during the fourth quarter also concerned some analysts and investors, helping send shares down 1.4% in after-hours trade, despite surprisingly large overall profit and revenue in that period.
Chief Financial Officer Luca Maestri told analysts during a conference call that Apple expects overall revenue to "grow low to mid single digits" during its fiscal first quarter, which ends in December. Analysts had expected revenue growth of 6.65% to $127.53 billion during the quarter, according to LSEG data.
Apple did say it expects double-digit growth in its services business in its first quarter, leading some analysts to ask executives during a call if overall hardware revenue might decline.
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“It’s an important milestone,” Apple CFO Luca Maestri said on a call with analysts. “We’ve got to a run rate of $100 billion. You look back just a few years ago and the the growth has been phenomenal.”
.Apple’s services unit has become a critical part of Apple’s appeal to investors over the past decade. Its gross margin was 74% in the September quarter compared to Apple’s overall margin of 46.2%.
Services contains a wide range of different offerings. According to the company’s SEC filings, it includes advertising, search licensing revenue from Google, warranties called AppleCare, cloud subscription services such as iCloud, content subscriptions such as the company’s Apple TV+ service, and payments from Apple Pay and AppleCare.
Apple boasts to investors that its sales from Services will grow alongside its installed base. After someone buys an iPhone, they’re likely to sign up for Apple’s subscriptions, use Safari to search Google, or buy an extended warranty.
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