Apple‘s Q2 2023 earnings report reveals a more than 4% decline in revenue, marking its second consecutive quarterly decline. The company’s earnings report was weighed down by factors such as consumers shunning non-essential purchases such as iPhones and Mac computers and slowing growth in its services business. This follows better-than-expected earnings from U.S. technology peers, which had raised hopes that the worst may be over for the sector.
While Apple did not lay off any employees, it is set to post its first-ever revenue decline across product lines. Even though iPhone demand and production have recovered in China after pandemic-driven disruptions last year, the company is experiencing moderate headwinds in its hardware businesses. iPhones are facing a modest contraction in premium device demand, and the iPad and Mac businesses could be weighed down by consumer and enterprise trends.
According to 23 analysts polled by Visible Alpha, hardware sales are set to decline over 7% to $71.93 billion in the second quarter. Mac sales, which account for nearly a tenth of Apple’s revenue, likely fell by a quarter, while revenue from the flagship iPhone is estimated to have declined by over 3%.
Despite the decline in hardware sales, Apple investors would be encouraged by a recovery in China, the company’s third-largest market. A nearly 1% pullback in the dollar during the quarter is also a bright spot. Additionally, the company’s services business, a key growth engine for Apple and home to its App Store and video streaming service, likely rose about 6%.
KeyBanc Capital Markets analyst Brandon Nispel believes efforts to grow market share in developing economies such as India and Brazil will be crucial for Apple. The company is ramping up its manufacturing and store presence in India as it looks to diversify its supply chain and gain consumers. The market could contribute $20 billion to annual revenue by 2025, according to brokerage Wedbush.
The weak hardware sales, decline in iPhone demand, and Mac computers suggest a tough quarter for Apple. However, investors are optimistic about Apple’s services business and its efforts to diversify its supply chain and gain consumers in developing economies.
