BEIJING, August 3 (TMTPost)— Apple achieved better-than-expected quarterly performance in its third largest market China, though sales of its flagship offering iPhone turned out to be weaker than the Wall Street’s expectation.

Credit：Visual China

Apple said on Thursday that iPhone generated $39.67 billion in the fiscal third quarter ended July 1, declining 2.5% from a year earlier. The iPhone sales missed analysts’ estimated $39.9 billion, down from $40.7 billion with a nearly 3% year-over-year (YoY) increase in the same quarter last year. Total revenue that quarter decreased 1.4% YoY to $81.8 billion, slightly better than the market expectation of $81.7 billion. The Cupertino, Calif.-based company first recorded the third consecutive quarter of yearly decline in revenue since 2016. The earnings per share (EPS) grew 5% YoY to $1.26, surpassing the estimated $1.19, and gross margin stood at 44.5%, versus the expected 44.2%.

Apple’s every business segment except Mac and serves missed the market projection in the June quarter. Revenue from App Store, Apple Music, Apple TV+ and other services hit a record of $21.21 billion with an 8.2% YoY increase. Analysts previously estimated the segment sales would increase 6% YoY to $20.7 billion. Mac sales dropped 7.3% to $6.84 billion, still better than the projected $6.3 billion with a more than 10% yearly decrease. iPad sales dived 20% to $5.79 billion, versus the estimated $6.4 billion. Apple said iPad performance was hit by base effect since sales last year were driven by launch of 2022 iPad Air.

Sales by regions showcased Greater China, the market that contributed almost one fifth Apple’s annual revenue, became the biggest surprise that quarter. Sales in the market jumped 7.9% YoY to $15.76 billion, much better than analysts’ expected $14.6 billion, which suggested flat sales growth. Sales there in the previous quarter also defied estimates but recorded a yearly slide of 2.9%.

Sales in Americas, Apple’s biggest market including the United States, fell 5.6% YoY to $35.39 billion, compared with the projection of $38 billion with a decline of 1.4%. Revenue from Japan and the Asia-Pacific market excluding the country and Greater China shed 11.5% and 8.5%, respectively. Europe saw sales edged up 4.8%.

Apple executives commented performance in China at the quarterly earnings call. The Chief Financial Officer Luca Maestri said sales in China went from negative to growth and emerging markets were good, growing double digits in June quarter. He pointed out the installed base of wearables is growing very quickly in China. Apple CEO Tim Cook suggested Chinese consumers swithing to the iPhone from rival mobiles played a key role in his company’s results in the biggest mobile market. “Switchers were a very key part of our iPhone results for the quarter, we did set a record,” Cook said. In addition to iPhone sales with a double-digit growth, sales of other segments were also high in China, according to Cook. The chief executive said iPhone switchers set a quarterly record and sales of both wearables, home and accessories and services also refreshed their quarterly records in China.  

Besides China, emerging markets were highlighted.  Maestri noted iPhone sales in India gained double-digit growth to a quarterly record and sales in Latin America and the Middle East also had very strong performance. As to performance in Americas, Maestri said the smartphone market in the U.S. has been in decline for the last couple of quarters. Cook said India is the second largest smartphone market in the world while Apple just has a very low and modest share there. “It’s a huge opportunity for us, and we’re putting all of our energies in making that occur,” he told analysts.