Apple Inc. disappointed investors today as it delivered its fiscal 2023 first-quarter results, missing expectations on revenue, profit and sales for many of its key business lines and sending its stock down in extended trading.

Apple’s total sales fell 5.5% from a year earlier, the first time its quarterly revenue has declined since 2019. The company reported earnings before certain costs such as stock compensation of $1.88 per share, down 11% from a year ago and missing Wall Street’s target of $1.94.

Apple’s revenue, at $117.15 billion, also came up short, with analysts hoping for $121.1 billion. Net profit for the quarter came to $29.9 billion, down from $34.6 billion a year earlier.

Not only was it a stunning miss by Apple, but also the company’s first earnings miss versus Wall Street’s expectations for almost seven years. It was also just the company’s second revenue miss since August 2017.

Apple Chief Executive Tim Cook (pictured) told analysts on a conference call that the results were affected by a combination of the strong dollar, production issues in China regarding its new iPhone 14 Pro and iPhone 14 Pro Max devices, and the wider global macroeconomic environment.

With regard to the first point, Cook told CNBC that Apple would have grown its revenue in most markets if not for the strong dollar. He added that supplies of the iPhone 14 Pro and iPhone 14 Max were significantly reduced throughout the quarter, resulting in fewer end sales to customers. During the quarter, Apple’s main iPhone assembly plant in China was affected by COVID-19-related shutdowns, disrupting production.

“We put out an update on that on Nov. 6 and it lasted through most of December,” Cook explained. “So we had a big hole there.”

The result was that Apple’s iPhone revenue came to just $65.78 billion during the quarter, down more than 8% from a year ago and below analysts’ expectations of $68.3 billion. Mac revenue also fell, by 28.6%, to $7.74 billion, way below the $9.63 billion forecast. Meanwhile, Apple’s other products revenue, which counts devices such as iPods and Apple Watches, saw revenue fall by 8.3%, to $13.48 billion, short of the $15.23 billion estimate.

There were some bright spots for Apple. For instance, iPad revenue surged by 29.6%, to $9.4 billion, way ahead of Wall Street’s guidance of $7.7 billion. Cook said that was driven by the launch of two new models, including a more affordable, lower-end device and a new high-end version.

Apple’s services business also performed well, with revenue increasing by 6.4%, to $20.77 billion, just ahead of Wall Street’s expectations. Apple officials said Apple Pay, Apple Card and Apple Music were some of the best-performing components within the services business. In the conference call, Cook revealed that some Apple employees are now beta testing a new “buy now, pay later” service that’s expected to launch soon.

Analyst Charles King of Pund-IT Inc. said Cook’s three bugaboos of the strong dollar, Chinese production woes and macroeconomic issues seem like reasonable excuses since they have featured in many other tech earnings calls recently.

“The main lesson here is that no company, despite massive success and profitability, can overcome obstacles outside of its control,” King said. “The larger question is what Cook and Apple are doing to minimize future disruptions. After all, the dollar remains strong, COVID is sweeping across China and economic issues continue to be volatile. Plus, as many have pointed out, Apple faces some particularly thorny challenges when it comes to worsening relations between China and the U.S.”

Holger Mueller of Constellation Research Inc. said that for all of Apple’s endeavors elsewhere, it remains “the iPhone company” and so its fortunes rise and fall with iPhone sales. “This quarter is proof of that, with production issues in China and economic headwinds, iPhone revenue fell by almost $6 billion from a year earlier,” the analyst said.

Surprisingly, Mueller added, Mac revenue was down by over $3 billion as well, so the $2 billion growth on the iPad side and the $1 billion increase from services was not enough for Apple to maintain its overall growth. “Instead, Apple is down, with its earnings per share falling by 20 cents,” he said. “What’s worrying is that Apple’s revenue fell across all geographies. The next quarter will show if it’s the supply chain issues, economic headwinds, or both factors that are slowing the company down.”

In another bit of good news, Apple said it now has more than 2 billion active devices globally, including iPhones, Macs, iPads and Apple Watches. That’s up from 1.8 billion devices one year earlier. It’s a key number that many investors track because it demonstrates the company’s global reach and suggests potential upside if it’s able to make more money from those users through its services.

“We attribute that to having a lot of switchers and a lot of first-time buyers in the case of the Apple Watch,” Cook said.

According to King, the 2 billion number is an intriguing one but it remains unclear how many customers that represents. “Since Apple’s business is based on an ecosystem of highly integrated and complementary products and services, it isn’t unusual for customers to own multiple devices. If that number translates into 400-500 million users, it’s still impressive but in a different way,” he said.

Cook conceded that the economic environment is “tough” and said the company is cutting costs, but did not talk about staff reductions. Apple is notably one of the few remaining big technology companies that has yet to announce layoffs.

“We’re cutting costs,” he said. “We’re cutting hiring, we’re being very prudent and deliberate on people that we hire.”

Apple’s stock fell more than 4% immediately after the results were published, but recovered slightly as officials provided some data points about its outlook for the current quarter. Apple Chief Financial Officer Luca Maestri said revenue in March would likely show a similar year-over-year trend to the December quarter, meaning that sales are likely to fall by around 5%. He added that services would grow, but Mac and iPad sales will probably decline by double digits.

Apple hasn’t provided official guidance since the pandemic emerged in 2020. Analysts are forecasting Apple to drive about $98 billion in sales in the current quarter.

Photo: iPhonedigital/Flickr