Apple posts strong holiday outlook after sales decline in China

(Bloomberg/Mark Gurman) — Apple Inc. projected a jump in sales over the holiday season after releasing new iPhones and worked to reassure investors concerned about a decline in revenue from China.

Sales in the fiscal first quarter, which runs through December, will rise by 10% to 12%, Chief Financial Officer Kevan Parekh said during a conference call with analysts Thursday. Analysts had predicted 6% on average. The period is expected to be “our best iPhone quarter ever,” he said.

Apple is navigating its way through a range of global challenges, including trade tensions, weakness in China and delays developing artificial intelligence features.

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Revenue from greater China fell 3.6% to $14.5 billion last quarter, well short of the $16.4 billion that analysts projected. The company faces mounting competition from local smartphone providers and has struggled to offer artificial intelligence features in the country. Still, Chief Executive Officer Tim Cook said he believes Apple will return to growth in the region during the current quarter.

With the company’s latest iPhone release in September, Apple updated the designs and introduced a new ultrathin model called the Air. The lineup remains the company’s biggest moneymaker, accounting for roughly half of its revenue.

Apple shares slipped 0.5% on Friday to $270.19. They’d been up 8.4% this year through Thursday’s close.

In the fiscal fourth quarter, which ended Sept. 27, sales rose 7.9% to $102.5 billion. That slightly beat the $102.2 billion average estimate. Earnings rose to $1.85 a share, topping the average estimate of $1.77.

The Cupertino, California-based company benefited from stronger-than-expected services growth in the period, helping offset a slowdown in China. The Mac and wearables division also performed better than anticipated.

Tariffs added $1.1 billion in expenses during the quarter, in line with Apple’s expectations. The company expects $1.4 billion in tariff costs in the December period. Operating expenses will range from $18.1 billion to $18.5 billion.

Revenue from the iPhone gained 6.1% to $49 billion in the September period, helped by the new models. Still, that was just short of the $49.3 billion that analysts projected. Apple said it faced supply constraints, which may have limited growth.

The quarter included roughly two weeks of iPhone 17 availability, and initial demand appeared strong — with sellouts reported across Apple retail stores and third-party channels. Most buyers opted for higher-end iPhone 17 Pro models, helping boost Apple’s average selling price. The $999 iPhone Air — more expensive than the model it replaced — also helped on this front.

Services remained Apple’s fastest-growing segment last quarter, with revenue rising 15% to $28.8 billion. Analysts had anticipated $28.2 billion.

Despite the healthy growth, the services business continues to face challenges from regulators seeking to change App Store policies, which could affect software and subscription revenue. However, Apple secured a recent legal victory when a judge declined to dismantle its $20 billion-a-year search deal with Alphabet Inc.’s Google.

Mac revenue increased 13% to $8.73 billion, topping the $8.6 billion average projection. The company refreshed its MacBook Air and Mac Studio lines in March and released a new entry-level MacBook Pro earlier this month.

The iPad business, meanwhile, introduced new low-end and Air models in March and updated a Pro version this month. It generated $6.95 billion in revenue, flat from a year earlier.

Sales at the wearables, home and accessories division, which includes AirPods, smartwatches, TV set-top boxes and the HomePod smart speaker, declined less than 1% to $9.01 billion. Analysts had feared a steeper drop in the period.

Once viewed as a key growth driver, the wearables division peaked in 2021 with nearly $15 billion in holiday-quarter revenue. Newer products like the Vision Pro headset, recently updated with a faster chip, have struggled to gain traction.

Still, Apple could see renewed interest in the coming years with the introduction of smart glasses and a wave of new smart home devices.

(Updates share move in sixth paragraph)

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