Apple CFO Luca Maestri disputed investors’ concerns about an 8% drop in revenue in China, pointing out that sales in other emerging markets are growing.
“When we start looking at countries like India, Saudi Arabia, Mexico, Turkey, Brazil… and Indonesia, the numbers become significant, and we are very happy because these are markets where our market share is (currently) low,” Maestri said Thursday during Apple’s second-quarter earnings conference call.
Revenue declined to $16.37 billion in China in the second quarter
“The populations are large and growing, and our products are really making a lot of headway in these markets,” Maestri continued. “The level of enthusiasm for the brand is very high.”
One thing Maestri said is verifiable: populations in emerging markets are, in fact, large and growing. But Apple’s growth in these regions is not as rosy a picture as the executive has tried to paint, according to available data.
Net sales in the Americas – which would include countries like Brazil and Mexico – fell slightly year-over-year to $37.3 billion from $37.8 billion, according to the report of Apple for the second quarter of 2024. Sales in the “rest of Asia Pacific,” which would include emerging markets like India and Vietnam, fell 17% from $8.1 billion in the second quarter of 2023 to $6.7 billion as of March 31.
To play devil’s advocate, Apple’s declining sales in these regions may have more to do with pricing than hype around the product.
Maestri noted that Apple has introduced several financing solutions and trade-in programs that “lower the affordability threshold,” so customers can purchase from the premium product line.
“This is very valuable for us in developed markets, but particularly in emerging markets where accessibility issues are more pronounced,” Maestri said.
However, pointing to the glimmer of hope that emerging markets might represent may not be enough to calm investors. China is Apple’s third largest market and has become a competitive battleground with domestic companies like Oppo and Xiaomi dominating the market. According to Counterpoint Research, Huwaei has seen a massive change in the country after being completely sidelined by US sanctions. The company’s phone sales increased nearly 70% from the previous year, while Apple’s sales fell 19%. In September 2023, Beijing banned government officials from using iPhones in the workplace, echoing the US action against Huawei.
China and emerging markets aren’t the only ones weighing on Apple’s bottom line this quarter. The company also reported a 10% decline in iPhone sales across all markets. Apple’s slow adoption of AI compared to competitors like Google and Microsoft also potentially played a role in slowing iPhone sales.
Despite unimpressive hardware numbers, Apple still managed to exceed Wall Street’s expectations. He also pointed to a stock rally of more than 10% in after-hours trading, fueled by both a surge in services revenue and a massive $110 billion stock buyback – a jump from $90 billion in purchases last year.
Investors on the call tried to get Maestri and Apple CEO Tim Cook to divulge more details about its upcoming generative AI launches, which Apple has teased in recent months, but Executives only revealed that the announcements were imminent.
We’ll keep an eye on Apple’s Worldwide Developers Conference for more news.
techcrunch
