NEW YORK: Apple Inc has delivered a mixed outlook to investors in its first quarterly (1Q) report under chief executive officer (CEO) John Ternus, with narrower profit margins overshadowing an upbeat sales forecast.
Though Apple predicted revenue growth of 7% to 10% during the holiday season, beating the 6.1% estimated by Wall Street, the company warned that gross margins would be thinner than projected.
It’s also suffering from supply constraints that will make it harder to capitalise on a wave of new products.
Ternus, who took the CEO job last month, is contending with another challenge – lofty investor expectations.
A rally in recent months, fuelled in part by Apple’s reputation as a haven from artificial intelligence (AI) tumult, added roughly US$1 trillion to Apple’s market value.
Against that backdrop, the shares fell about 3% in late trading on Monday.
“Product gross margin degradation remains a key near-term issue,” Bloomberg Intelligence analysts Anurag Rana and Josh Christensen said in a note.
Total revenue rose 12% to US$114.5bil during the fiscal 4Q, which ended Sept 26.
Analysts had estimated US$113.5bil on average, according to data compiled by Bloomberg.
Sales growth in the quarter decelerated from a 16% clip in the previous three months, and the numbers from Apple’s iPad, China and wearables businesses were disappointing.
But the iPhone, the company’s biggest moneymaker, remained strong.
Gross margin, the percentage of sales remaining after deducting production costs, will be 45% to 46% in the December quarter.
Analysts projected 47%, and the benchmark was above 50% in the June quarter.
“Higher memory costs and expenses related to the new Siri AI digital assistant weighed on the figure,” Apple said.
Ternus became CEO on Sept 1, putting him in charge for the final month of Apple’s 4Q.
He has since overseen the unveiling of the foldable iPhone Duo, touch-screen MacBook Pro and HomeView hub, though none of those products went on sale until the current quarter, which runs through December.
Apple itself had projected 4Q revenue growth of 9% to 11%.
Though sales from greater China increased 21% to US$17.5bil, that was more than US$1bil short of estimates.
Revenue from the iPhone grew 17% to US$57.6bil during the quarter, topping an average estimate of US$56.5bil.
That shows the company is weathering a schedule change in its product releases.
Apple typically launches multiple new iPhones in September, but this time only released the iPhone 18 Pro line.
A regular iPhone 18 and new iPhone Air aren’t arriving until the first half of financial year 2027, while the foldable iPhone Duo didn’t launch until Oct 23, deep into the following quarter. — Bloomberg
