Apple Inc. Faces Potential Fifth Straight Quarterly Revenue Decline

Apple Inc. is at risk of experiencing its fifth consecutive decline in year-over-year quarterly revenue, a troubling trend that has not been observed since at least 1998.

In its recent earnings report, the tech giant revealed a fourth consecutive quarter of revenue declines, causing concern among investors. Despite this, Chief Financial Officer Luca Maestri did little to alleviate fears, stating that overall revenue in the upcoming December quarter would be "similar" to the previous year. In that period, Apple reported $117.1 billion in revenue.

While Maestri remains hopeful of growth within the iPhone business during the December quarter, Apple faces numerous challenges. One factor is that the year-ago quarter had an extra week, and there is also the potential negative impact of currency pressures on results.

Furthermore, Maestri expects a "significant deceleration" in revenue from iPad and wearables during the current quarter. This is due to challenging comparisons with the previous year when Apple experienced reduced supply disruptions, resulting in a boost in demand during the September and December quarters.

Despite these challenges, Apple's guidance falls short of the consensus view of $123.1 billion for the December quarter. This outlook appears to be affecting the company's share price, which saw a 3% decline in after-hours trading.

Apple's revenue decline in the September quarter already achieved a less-than-promising historic milestone. The last time the company experienced four consecutive quarters of revenue drops was during the dot-com bust from 2000 to 2001. However, this data only goes back to 1998, and there were no instances of five-quarter declines within that timeframe. It is worth noting that this era does not account for the period when co-founder Steve Jobs returned in 1997, during which Apple faced financial struggles and saw stagnation in product development and sales.

Although Maestri projects "similar" revenue in the December quarter compared to the previous year, there is uncertainty surrounding the economic climate. As a result, it is possible that Apple's total revenue may fall below last year's figure.

Apple Executives Address Concerns on China Pressures in Latest Earnings Report

Apple recently released its latest earnings report, with executives addressing concerns about China pressures and overall macroeconomic weakness. However, their comments did little to substantiate these worries.

Although overall sales in China dropped 2.5% from the previous year, amounting to $15.0 billion, Apple's Chief Executive Tim Cook attributed this decline to tough comparisons for Macs and iPads rather than challenges for the iPhone, as many had feared.

During a Q&A session about China, Cook stated, "The iPhone actually set a September-quarter record in mainland China, and what pulled down the performance was a combination largely of Mac and iPad." He further explained that the Mac and iPad suffered from the same issues the company faced with factory disruptions in the fiscal third quarter, which were subsequently resolved in the fiscal fourth quarter.

The services business emerged as the 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 met expectations precisely.

Despite this, Wall Street analysts are likely to revise their estimates for the December quarter, anticipating a slight year-over-year uptick.

While Apple's management did not specifically mention macroeconomic pressure during the earnings call, their comments may not have assuaged concerns about the impact of consumer caution on performance.

Following Amazon.com Inc.'s forecast of a soft holiday quarter, some believe that Apple's management should have placed more emphasis on healthy consumer trends in the business beyond just services. Without such enthusiasm, investors may remain on the sidelines until the economy improves.