Apple iPhone revenue misses estimates in Q1 earnings release

Yahoo Finance Live's Seana Smith breaks down Apple's weaker-than-expected first quarter earnings.

Video transcript

[AUDIO LOGO]

DAVE BRIGGS: We've got some numbers coming up?

SEANA SMITH: Yeah, I've got some numbers here from Apple. Let's take a look at the stock's reaction here after hours and a very disappointing report. You can see that in the numbers here. Takin ga look at sales, that missed expectations, 117.2 billion. The estimate out on the Street was for 121.1 billion. EPS also coming in a bit light at $1.88. The estimate was for $1.94, so light there.

iPhone revenue also a miss, 65.78 billion. Estimate was for 68.3 billion. iPad revenue was better than expected, one of the bright spots in this report. iPad revenue coming in 9.4 billion, estimate was four 7.78 billion. Wearables, 13.48 billion, estimate there was for 15.32 billion.

Couple of other headlines here, Apple now has over 2 billion active devices as part of its installed base. We know China obviously a huge focus here for the company. Greater China revenue 23.91 billion, estimate was for 21.8 billion. Services, a very huge focal point in this report. First quarter services revenue coming in at 20.77 billion. That was slightly better than the Street's expectations at 20.47 billion.

But that overall miss on the top and bottom lines and the fact that iPhone revenue came in a bit light, 65.78 billion, clearly a bit worrisome here for Apple headed forward and what that demand picture looks like.

DAVE BRIGGS: Yeah, I mean, look, this is probably still-- I think the characterization going in was best house in a bad neighborhood, cleanest dirty shirt. And I think that's still pretty much holds for a quarter that we all expected to be down a little bit. iPad was expected to be the bright spot for Apple, and it was.

We're not going to get a great look at picture-- at the picture with the iPhone because the 14 had those production issues because of the shutdowns in China. So it's really going to be difficult to get a long-term read on where Apple's headed because we know, as bad as it got for smartphones, they increase their market share. And once those supply chains are fixed, it might be a buying opportunity. Brad, what are you seeing?

BRAD SMITH: Well, I was playing close to a few things-- close attention to a few things, two of them in particular here. And I'm glad you mentioned that iPhone figure coming in lighter than expected here because what that also signals is that it's in-- some of the core customers that Apple has gone after and relied on for these supercycles that are perhaps starting to push back on price.

And you've seen that in other elements of retail. However, your phone is such an appendage that you carry around on a day in, day out basis. And if you see customers that are saying, you know what, my phone is just fine, the battery still cranking, why do I need to upgrade right now, that is a pushback that Apple needs to be more concerned about because then it impacts the pricing strategy, especially in some of the other regions that they're going to be monitoring.

Now, that greater China number that you mentioned, that sticks out as well because that's a region that's going to have some stimulus that's getting pumped into the economy there. You had that greater China number come in higher than anticipated. And the IMF has already signaled that the growth over the course of this year is going to be led, in lion's share, by what? India and China.

And so any strength that you continue to see Apple hold onto within that region could be critical going forward from here. So those are two of the things that really stick out to me from this earnings. And as a person who's sitting here wearing an Apple Watch, that wearables figure, that also kind of jumped out to me a little bit too.

SEANA SMITH: Me too.

DAVE BRIGGS: To another person wearing an Apple Watch--

SEANA SMITH: I am huge believer in the Apple Watch. I have helped those sales in the past. But some commentary here from Apple's CFO in this release about the economy, about supply chain issues, saying that, we set an all time revenue record, 20.8 billion there. But still, when we come to the fact that they did miss here, a challenging economic environment, Tim Cook illustrating that.

They're also saying that production is now back to where we want it to be. So going forward there, some concerns just about what exactly that demand picture is going to look like. But again, a huge concern here when you take into account what the economy, the current environment that we are in right now, what that iPhone revenue number could look like going forward.

Yeah, some of those production issues could be in the rearview mirror. But the demand story going forward, certainly something that Apple continues to worry about.

DAVE BRIGGS: The look at the consumer, the look at the economy. I was looking for to put either of you on the spot, do we have a number on services? Because I think you're going to get a better indication there.

SEANA SMITH: Yeah.

BRAD SMITH: And that services figure that Seana mentioned earlier as well, $20.77 billion rounding there. And this is a part of the Apple Business that's going to be slated to be, eventually, $100 billion run rate that they're trying to grow that out to as well here. So that's a big figure to keep your eye on.

$80 billion is what we're getting close to here. And it was $50 billion back in 2020.

DAVE BRIGGS: And that is a Tim Cook original. And that's where we thought we'd see a notable decline. You said 20.77, but the expectation was what?

BRAD SMITH: The expectation was for that to come in at 20.46 billion for services.

DAVE BRIGGS: OK.

SEANA SMITH: Yeah, and going back to the quote that I was reading before my screen jumped off, the CFO saying that we set an all-time revenue record of 20.8 billion in that services business. And in spite of a difficult macroeconomic environment and the significant supply constraints, we grew total company revenue on a constant currency basis. So they're trying to spin that positive narrative here.

BRAD SMITH: Absolutely.