Apple Inc. is preparing for a challenging December due to a projected decline in iPhone sales, primarily driven by weakening demand in China.
UBS analysts have revised their estimates, predicting a drop in iPhone unit sales to 74 million from an earlier forecast of 77 million, with revenue expectations adjusted downward to $67.2 billion from $69.7 billion. This adjustment reflects concerns about Apple's market share in China, where competition from local brands like Huawei and Xiaomi is intensifying.
The revisions by UBS also lower the overall revenue estimates for the December quarter to $120.8 billion, falling short of the street consensus of $124.9 billion. The earnings per share forecast has been adjusted to $2.25, down from $2.31, while the market anticipates a higher figure of $2.36.
Recent data from Counterpoint Research reveals an 8% year-on-year decline in iPhone sell-through for November, with total units sold reaching 20.7 million. This decline is largely attributed to the Chinese market, which has seen a significant drop in demand. Apple's global market share for the iPhone has dipped to 20.1%, its lowest level since November 2019.
The competitive landscape is becoming increasingly challenging for Apple, as local players continue to gain traction. The introduction of artificial intelligence features in the iPhone 16 models has not provided the expected boost in sales, especially as Apple has lagged behind its competitors in rolling out these innovations. Regulatory hurdles in China have also delayed the rollout of AI features, further complicating Apple's efforts to regain momentum in a critical market.
Despite the challenges in hardware sales, Apple's services revenue remains strong. The App Store and robust demand for its software offerings have helped to cushion the impact of declining iPhone sales. The services sector has become increasingly vital for Apple, contributing significantly to its overall revenue and helping to diversify its income streams. As the company continues to innovate and expand its services portfolio, it may find opportunities to offset the pressures faced in its traditional hardware business.
This strategic pivot towards services could be crucial for maintaining investor confidence and ensuring long-term growth amidst a challenging market landscape. Apple's ability to adapt to changing market dynamics and consumer preferences will be critical as it seeks to navigate these turbulent waters.