Apple Inc. could potentially see a fifth straight decline in year-over-year quarterly revenue, a grim milestone not seen going back to at least 1998.
After the tech giant posted its fourth consecutive quarter of revenue declines Thursday, Chief Financial Officer Luca Maestri failed to assure investors that growth would resume in the holiday period, saying that overall revenue in the December quarter would be “similar” to a year ago, when Apple reported $117.1 billion in revenue.
While Maestri expects the iPhone business to show growth in the December quarter, Apple
AAPL,
is battling several adverse factors, including that its year-ago period saw an extra week and that currency pressures could negatively impact results.
What’s more, Maestri anticipates a “significant deceleration” in iPad and wearables revenue in the current quarter, due to tough comparisons with a year ago, when Apple saw big supply disruptions ease, resulting in solid demand boosts during the September and December quarters.
The guidance came up shy of the consensus view of $123.1 billion for the December quarter and seemed to be weighing on shares, which were off 3% in the extended session.
Apple’s revenue decline in the September quarter already marked a mediocre historic feat: The last time Apple saw four consecutive quarters of revenue drops was during the dot-com bust, from 2000 to 2001, according to FactSet. That data only goes back to 1998, and there were no five-quarter declines in that stretch, which doesn’t include the era before co-founder Steve Jobs returned in 1997. Back then, Apple was near bankruptcy, with stagnant products and falling sales.
Maestri’s projection for “similar” revenue in the December quarter to the year-prior period implies flat growth, but given an uncertain economic climate, it’s possible the company’s total could come in below last year’s mark.
Though some on Wall Street were concerned about China pressures or overall macroeconomic weakness heading into the latest earnings report, Apple executives didn’t offer too much in their qualitative comments to substantiate those worries.
Indeed, overall sales in China fell to $15.0 billion, down 2.5% from a year before, but Apple Chief Executive Tim Cook blamed the drop on tough comparisons for Macs and iPads, not challenges for the iPhone, as many had feared.
“IPhone actually set a September-quarter record in mainland China, and what pulled down the performance was a combination largely of Mac and iPad,” Cook said in response to a question about China. “Services also grew during the quarter and the Mac and iPad suffered from the same issues that the company did with the compare issues to factory disruptions in [the fiscal third quarter] that were filled subsequently in [the fiscal fourth quarter].”
The services business was the real only bright spot in Apple’s overall results, with better-than-expected revenue that offset disappointments in Macs, iPads and wearables. Revenue for the iPhone in the September quarter was exactly on target.
Wall Street analysts will likely cut estimates for the December quarter, as the consensus forecast was for a slight year-over-year uptick.
But while Apple’s management didn’t make specific callouts of macroeconomic pressure on the earnings call, executives may not have done enough to quell concerns that consumer caution is impacting performance.
After fellow tech giant Amazon.com Inc.
AMZN,
forecast a soft holiday quarter, perhaps Apple’s management should have spent even more time talking up healthy consumer trends in the business, beyond services. Absent such enthusiasm, investors may end up waiting on the sidelines until the economy turns around.
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