China Ruins Apple's Quarter

24/7 Wall St. Insights

Based on analysts’ comments and the mediocre performance of its shares, Apple Inc. (NASDAQ: AAPL) had an average quarter. It still trades below the S&P 500 this year, which is unusual. Traders are probably waiting for the next report to see how the iPhone 16 is doing. When teased apart, its divisions showed an alarming fact: Apple is doing poorly in China.

China is by far the world’s largest smartphone market. About a billion people in China have smartphones, compared to just over 300 million in the United States.

Apple’s overall revenue rose 6% for the quarter to $94.9 billion, and per-share earnings rose 12% to $1.64. Revenue from its promising Services business hit $24.97 billion, up from $22.31 billion. That means its annual run rate is over $100 billion. That is almost better than Mac, iPad, and Wearables combined.

Greater China revenue was flat at just over $15 billion, barely half Apple’s revenue in Europe.

The China figure shows that the iPhone maker has not successfully competed with the large smartphone companies in the world’s largest country by population. Based on phones shipped, Apple was second to Vivo in the third quarter. It was barely ahead of Huawei and Xiaomi. The three Chinese companies grew during the quarter, year over year, while Apple’s shipments were flat.

When Apple announces figures for the current quarter, investors will examine iPhone 16 sales and whether the iPhone picked up enough market share in China to make it the smartphone leader there.

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