Decrease in Apple's Earnings; First Dip in a Decade
Apple's share price has experienced a significant decline, with a 38.4% drop from $659.39 on 1 October last year, currently standing at $406.13. This drop is primarily due to flattened revenue and earnings growth since 2023 and increased competitive pressures, particularly from Chinese smartphone manufacturers.
During a conference call with investment analysts, Apple's CEO Tim Cook acknowledged the decline in Apple's stock price over the last couple of quarters as frustrating. He also admitted that Apple's growth rate has slowed and margins have decreased from the exceptionally high level experienced in 2012.
Jan Dawson, chief telecoms analyst at Ovum, expressed that Apple's historical success has led investors to expect constant sales and margin growth. He further stated that a large part of the problem with Apple's share price is that it has trained analysts to expect ever-increasing revenues and profits, and that it will beat its own guidance consistently.
Sales for the most recent financial quarter increased by 11% to $43.6 billion, but Apple's net income decreased by 18% year-on-year to $9.5 billion. Apple CFO Peter Oppenheimer stated that the iPad Mini's margins are significantly below the corporate average.
Dawson suggested that beating guidance is a positive thing in its own right, but it is likely to lead to continued overheated estimates from analysts, which is not in Apple's longer-term interest. He also stated that expecting revenues and margins to continue to grow is unrealistic.
Oppenheimer made a statement during the conference call that undermined Apple’s promise to provide more realistic guidance, suggesting that beating guidance was the worst thing Apple could have done.
Despite these challenges, Apple’s Services division (including the App Store, Apple Music, and iCloud) remains a strong, recurring revenue source. There is optimism about future iPhone demand, particularly with the anticipated launch of the iPhone 17 in Q3 2025, which may help drive a rebound in the stock price.
Wall Street sentiment is cautiously optimistic, with many analysts rating Apple stock as a "moderate buy," reflecting expectations for stabilization and modest growth following the slowdown. As of August 2025, Apple's stock trading near $224 per share shows a recovery from its earlier lows in the year but still reflects uncertainty due to these fundamental pressures.
- In the context of Apple's financial situation, the reduced share price and slow growth rate are attributed to increased competition in the business sector, particularly in technology-focused industries like smartphone manufacturing.
- The continued expectation for Apple to deliver constant sales and margin growth stems from its historical success, as suggested by Jan Dawson, chief telecoms analyst at Ovum, but this unrealistic anticipation could potentially hinder Apple's longer-term interest.
