Apple shares dip on weaker iPhone sales

iPhone sales that fell short of expectations were partially offset by the company’s performance in the services sector.

However, Apple shares were down close to 2% in Friday premarket trading.

Apple exceeded predictions by reporting earnings per share (EPS) of $1.26 on revenue of $81.80B, compared to $1.19 and $81.73B, respectively.

Nearly half of all revenue, or $39.67 billion, came from the iPhone, falling from $40.67 billion a year earlier and falling short of projections of $39.91 billion.

Gross margin for the quarter was 44.5%, exceeding expectations of 44.2%, thanks to record growth in the computer giant’s higher-margin services division.

Apple’s services division, which includes Apple News, Apple TV+, and iCloud, generated $21.21 billion in revenue in the third quarter, up from $19.60 billion in the same period last year, beating projections of $20.76 billion.

“We had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone,” Apple CEO Tim Cook said.

In the third quarter, iPad revenue declined 20% year on year to $5.79 billion, falling short of Wall Street expectations of $6.41 billion. Wearables, home, and accessories up 2.5% year on year to $8.28B in Q3.

Apple shares fell even further after CFO Luca Maestri stated on the conference call that the company anticipates September quarter sales to be comparable to June quarter numbers. Given that sales declined 1% year on year in FQ3, this comments would imply FQ4 sales of $89.25 billion, about $1 billion less than the estimate.

On a more upbeat note, Meastri stated that Apple expects iPhone and service YoY growth to quicken beginning in the June quarter.

Citi analysts initiated a 90-day positive catalyst watch on AAPL stock as a result of this anticipated acceleration and gross margin growth.