iPhone revenue dropped 20% year-over-year in the quarter ending in September.
But the iPhone sales situation isn’t as bad as it looks because Apple didn’t launch its new phones until October this year.
Apple said it expects iPhone revenue to grow in the December quarter, which included $55.96 billion in iPhone sales in the same period last year.
Revenue Beats Estimates In Q3
Apple reported earnings on Thursday and investors did not like the results. Apple stock dropped as much 5% in extended trading even though the company beat Wall Street expectations for both profit and revenue.
The drop was likely because iPhone revenue came in at $26.4 billion, which was 20% lower than the same quarter last year.
Apple sales in China also suffered, mainly because of weak iPhone sales, Apple said. Revenue from China dropped to $7.95 billion from $11.13 billion a year before, a 29% decrease.
But the iPhone sales situation isn’t as bad as it looks. This year, Apple’s new iPhones went on sale about a month later than before, as Apple telegraphed over the summer.
So the iPhone weakness may be partly because people were waiting for the new iPhone 12, which didn’t go on sale until October. In fact, both Apple CEO Tim Cook and CFO Luca Maestri said that iPhone customer demand was strong and grew until mid-September — when Apple typically releases new iPhones.
“This is a very impressive level of performance when we consider that this year we did not launch and ship any new iPhone models during the quarter,” Apple CFO Luca Maestri said about Apple’s fiscal fourth-quarter, which ended in September.
Apple presented several supporting points on Thursday:
Demand was higher than last year during the first part of the quarter. Through mid-September, when Apple held a launch event with new Apple Watches but no new iPhones, demand for iPhone 11 models “grew double digits and was well above our expectations,” said Maestri.
Cook went into more detail: “If you look at iPhone and you look at it in two parts, one pre-mid-September which is pre- the point at which the previous year we would have launched iPhone, that period of time which is the bulk of the quarter, iPhone was growing from a customer demand point of view and of course the not shipping new iPhones for the last two weeks of September makes that number in the aggregate a negative,” Cook said.
Growth expected in the holiday quarter. Apple expects iPhone revenue to grow in the December quarter — despite the fact that the new iPhone 12 models were launched 4 weeks into the quarter and two new iPhone models haven’t gone on sale yet. Last year Apple reported $55.96 billion in iPhone sales in the period.
Revenue Boost From China
China also expected to grow. “Greater China is a region that was most heavily impacted by the absence of the new iPhones during the September quarter. Still, we beat our internal expectations in the region, and iPhone customer demand grew through mid-September,” Cook said.
Cook then said that he expects China revenue to grow in the December quarter.
“A larger percentage of China revenue is made up of new iPhones. And so that’s the reason the number for the total quarter started with a minus sign. But given what we see in the early going with the new iPhones, we’re confident we’ll grow in Q1,” Cook told Josh Lipton in an interview.
Supply constraints. Apple says that it is “supply constrained” for iPhones, which means that they are selling faster than Apple can make them.