Why Apple Shares Dip Despite Earnings Top Estimates

Revenue fell to $89.5 billion in the fiscal fourth quarter, which ended Sept. 30. That compared with an average Wall Street estimate of $89.35 billion. The company said iPhone sales increased to $43.8 billion in its fourth quarter, slightly beating expectations and marking a new record for iPhone sales in its fiscal fourth quarter. Services revenue surpassed $22 billion for the first time. Revenues in its Mac, iPad, and Wearables categories fell from the same quarter last year.

Apple's latest results also showed its home market was a standout in its fourth quarter, with sales in its Americas region rising over last year, the only major geography to see revenue rise year-over-year.

Revenue fell 1% in the latest quarter, Apple said, extending its recent contraction to four quarters in a row. It also said that revenue in the current quarter was likely to be in line with the same period the year before. However, this quarter will also be one week shorter, hitting revenue by 7 per cent.

The amount it took from services such as iCloud and Apple Music also hit a high, bringing in $22.3bn for the California-based firm, up 16% from a year before. The company is looking to make that business even more lucrative: It raised the prices for Apple TV+, Arcade and News+ last month, though that change was too recent to affect these results. While Apple's state-of-the-art hardware has led the company to trillion-dollar status, its evolution as a services provider and expansion into music, gaming, and entertainment form the center of optimistic cases for its future.

Along with an accelerating shift to higher-margin services businesses, which account for 24.9 per cent of overall revenue, CFO Maestri said Apple had benefited from an increase of only 2 per cent in operating costs.

Analysts have expressed concerns about the decreasing demand for Apple devices, especially in China, where the company's flagship iPhone is facing tougher competition from local brands. During the quarter, sales for iPads and Macs declined by double digits compared to the same period last year, which is another issue that has been raised by analysts.

In a call with analysts, chief executive Tim Cook made a spirited defence of Apple's position, arguing that the iPhone appeared to gain market share in mainland China in the latest quarter and increased sales when the overall market appeared to be contracting.