Apple (AAPL) announced its first quarter earnings after the bell on Thursday, beating analysts’ expectations on the top and bottom lines on better than anticipated iPhone sales. Warning signs on its business in China, however, gave a chill to investors about a market that represents about one-fifth of Apple’s sales.
In the quarter, Apple saw earnings per share of $2.18 on revenue of $119.6 billion. Analysts were anticipating earnings of $2.11 on revenue of $117.9 billion.
Apple reported iPhone sales of $69.7 billion, compared with expectations of $68.6 billion. But sales out of China, the company’s third largest region after North American and Europe, were lower than anticipated, topping out at just $20.8 billion. Wall Street was looking for sales of $23.5 billion.
The company’s stock fell more than 2% in premarket trading on Friday.
Apple is dealing with both a sluggish Chinese economy as well as a resurgent Huawei in the country, which has hurt sales in the region. But strong showings in both North American and Europe helped buoy the company.
“Today Apple is reporting revenue growth for the December quarter fueled by iPhone sales, and an all-time revenue record in Services,” Apple CEO Tim Cook said in a statement.
“We are pleased to announce that our installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments.
Apple’s Mac revenue topped out at $7.8 billion in the first quarter, missing analysts’ expectations of $7.9 billion. The company’s iPad revenue also missed at $7 billion. Wall Street was looking for $7.1 billion. That’s a steep drop from the $9.4 billion the iPad business generated last year.
According to Bloomberg’s Mark Gurman, Apple will introduce refreshed iPads and Macs in March, which could help goose sales numbers for both business segments in the year ahead.
Wearables, home, and accessories pulled in 12 billion, hitting estimates. Apple has been contending with an ongoing patent battle with medical device maker Masimo, which forced the company to temporarily take the device off of store shelves.
It has since removed the blood oxygen sensor component that triggered the dispute from its Series 9 and Ultra 2 watches, but it’s unclear how much of an impact that has had on sales.
Apple’s Services segment, meanwhile, reached $23.1 billion, short of an anticipated $23.4 billion.
Apple’s earnings come as the company prepares to launch its Vision Pro AR/VR headset. The device, which Apple calls a spatial computer, goes on sale Feb. 2 for $3,499. And while it’s certainly an impressive product, its price tag will likely limit sales among most consumers.
While Apple doesn’t release exact device sales figures, it will be interesting to see what kind of commentary CEO Tim Cook has to offer around the initial uptake in Vision Pro preorders and how the developer community is responding. After all, if the Vision Pro is to be a success, it’ll need developers to build apps for it.
Daniel Howley is the tech editor at Yahoo Finance. He’s been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.
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