The slowdown comes as Wall Street analysts worry the company does
not have another blockbuster product to replace the iPhone. Apple
does not report Watch sales, but it does not appear to have the
makings of being a hit on the same level as the iPhone a year after
And while the company is reportedly working on a car, what it plans
to do in that area and when are still unclear.
The company's shares, which have fallen 5 percent this year, bounced
around in after-hours trading and were down more than 2.6 percent.
"It's disappointing to see them miss on an already downward adjusted
sales number and the fact is that with their iPhone growth slowing
what was needed was a product to be excited about," said J.J.
Kinahan, chief strategist at TD Ameritrade. "Pressure on the shares
will continue without a well-defined plan to grow sales or a new
The company said on Tuesday it sold 74.8 million iPhones in its
fiscal first quarter, ended Dec. 26, the first full quarter of sales
of the iPhone 6S and 6S Plus. The 0.4 percent growth in shipments
was the lowest since the product was launched in 2007.
IPhone sales were expected to fall for the current quarter compared
with the same quarter last year, Chief Executive Officer Tim Cook
said on a conference call with analysts.
But suggesting there is still room for growth, 60 percent of people
who had an iPhone prior to the launch of the iPhone 6 have yet to
upgrade to an iPhone 6 or 6S, Cook said.
And iPhones remain popular with American consumers. According to a
Reuters/Ipsos poll, 86 percent of iPhone owners were somewhat or
very likely to buy another iPhone.
Of those likely to buy a phone, 15 percent are currently looking to
upgrade and 17 percent will when the next iPhone is released. The
January poll had a credibility interval of 2.0 percentage points.
While revenue in Greater China rose 14 percent in the last quarter,
Apple is beginning to see a shift in the economy, particularly in
Hong Kong, Apple Chief Financial Officer Luca Maestri told Reuters
in an interview.
"As we move into the March quarter it's becoming more apparent that
there are some signs of economic softness," Maestri said. "We are
starting to see something that we have not seen before."
Apple forecast second-quarter revenue of $50 billion to $53 billion,
below analysts' average forecast of $55.5 billion. In the same
quarter last year Apple reported revenue of $58 billion.
[to top of second column]
Apple's guidance for the March quarter implies iPhone sales of 50
million to 52 million units in the March quarter, which would mark
the company's first-ever decline in sales of the gadget, said
analyst Daniel Ives of FBR Capital Markets & Co.
In the same quarter last year Apple sold 61.2 million iPhones.
The company reported revenue of $18.37 billion from Greater China,
accounting for 24.2 percent of total revenue. Revenue from the
region had nearly doubled in the fourth quarter.
Apple's iPhone shipments fell short of analyst expectations for 75.5
million, according to research firm FactSet StreetAccount.
Apple reported earnings of $3.28 per share, beating the average
analyst estimate of $3.23 per share, according to Thomson Reuters
I/B/E/S. Revenue increased 1.7 percent to $75.87 billion, both
records for the company.
Analysts had expected revenue of $76.54 billion.
Apple's overall performance was "slightly better than feared," said
Ives at FBR.
And despite the slowdown, Apple remains the most profitable company
in the S&P 500 and the most valuable publicly traded U.S. tech
The rise in iPhone shipments in the key holiday shopping quarter was
the smallest since the second fiscal quarter of 2013, when they rose
6.8 percent, according to data company Statista.
Maestri attributed the lackluster revenue to foreign exchange
headwinds caused by the strong U.S. dollar, which he said knocked
about $5 billion off the company's revenue.
(Additional reporting by Anya George Tharakan in Bengaluru; Editing
by Stephen R. Trousdale, Bill Rigby and Lisa Shumaker)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.