Most significant drop in Apple sales since the year 2019

The rising cost of living squeezed consumers at the end of 2022, leading to a decline in Apple sales. In the three months ending in December, sales at the iPhone maker were down 5% compared to the corresponding period in 2021. As bad as that sounds, it was actually the biggest drop since 2019.

The revision arrived as numerous businesses issued warnings of an imminent economic slowdown, particularly in the booming tech industry during the pandemic. Apple CEO Tim Cook acknowledged the company was operating in a “challenging environment.”

He attributed the drop in sales to a combination of factors, including supply shortages caused by the Covid-19 outbreak in China (where its phones are made) and a strong dollar, as well as broader economic weakness caused by price increases, the conflict in Ukraine, and the aftermath of the pandemic. “As the world continues to face unprecedented circumstances… we know Apple is not immune to it,” he told investors on a conference call.

Apple has stated that its global sales have decreased across the board. More than 8% of iPhones sold were less than expected, and sales of Mac computers were down 29%. Profits dropped by 13% to $30bn (£24bn) as a result of the downturns. To the BBC’s Today programme, Elevation Partners’ founding partner Roger McNamee explained that Apple’s supply chain in China was the company’s biggest problem.

He said, “Apple, which has historically done the vast majority of its manufacturing in China, has had supply chain issues,” adding, “China has taken a more combative approach with Western economies over the past year and a half, partly due to their zero tolerance on Covid but I think there are other geopolitical issues factoring in as well.” “The extent to which Apple may have demand issues is unknown. It is abundantly clear that they are unable to acquire all of the stock they require.”

Apple, like many other electronics companies, is having trouble convincing customers to upgrade due to “what is perceived to be incremental improvements on previous models,” according to PP Foresight analyst Paolo Pescatore. “Even more so in these times of universal belt-tightening,” he elaborated.

This year, Apple’s CEO will take a pay cut of more than 40 percent. More than 2 billion Apple devices are in use around the world, and Apple executives expect their services business, which includes Apple Pay and Apple News, to continue driving growth.

Apple's CEO will take a pay cut

CFO Luca Maestri assured investors that the company was prepared for sales to continue declining in the coming months, but he reassured them that the company’s outlook was “very promising” when he looked at the behaviour of its installed base. When providing updates to investors, other major tech companies also mentioned feeling the heat.

Amazon, which has been trying unsuccessfully to revive its online store business, reported a 2% decline in online sales during the last three months of 2022 compared to the same period the year before. Amazon’s quarterly revenue increased by 9 percent to $149.2 billion, helped in large part by a surge in cloud computing revenue.

However, profits plummeted to nearly zero from $14.3bn a year ago, a trend that chief financial officer Brian Olsavsky warned investors would likely persist in the coming months. Alphabet’s (the company that owns Google and YouTube) revenue grew by only 1% in the three months ending in December compared with the same period in 2021, as businesses reduced spending on advertising (Alphabet’s primary source of income) in response to economic uncertainty.

In his opinion, “the problems for Google and Amazon are remarkably similar,” Mr. McNamee said. “As people stayed indoors for both work and play during the pandemic, business was good for both companies and others in the web industry, such as Meta. Things have calmed down now that we have returned to work.”