Apple CFO Luca Maestri questioned investor concerns about a 8% drop in China revenuenoting that sales in other emerging markets are growing.
“When we start looking at places like India, Saudi Arabia, Mexico, Turkey, Brazil… and Indonesia, the numbers are increasing and we are very happy because they are markets in which our market share is greater. [currenttly] low,” Maestri said Thursday during Apple’s second-quarter earnings conference call.
Revenue fell to $16.37 billion in China during the second quarter
“The populations are large and growing, and our products are really making a lot of progress in those 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 those regions is not as rosy a picture as the executive tried to paint, based on available data.
Net sales in the Americas, which would include places like Brazil and Mexico, fell slightly year over year from $37.8 billion to $37.3 billion, according to Apple Q2 2024 Report. Sales in the “rest of Asia Pacific,” which would include emerging markets such as 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 sales decline in those regions may have more to do with price than product hype.
Maestri noted that Apple has introduced several financing solutions and trade-in programs that “lower the affordability threshold” so customers can purchase high-end products.
“That’s very valuable for us in developed markets, but particularly in emerging markets where affordability issues are more pronounced,” Maestri said.
Still, pointing to the ray of hope that emerging markets could be may not be enough to reassure investors. China is Apple’s third largest market and has become a battleground of strong competition with domestic companies such as Oppo and Xiaomi dominating the market. According to counterpoint research, Huwaei has undergone a massive turnaround in the country after being completely sidelined by US sanctions. The firm’s phone sales increased almost 70% compared to the previous year, while Apple’s fell 19%. In September 2023, Beijing imposed bans on the iPhone for government officials in the workplace, echoing the US action against Huawei.
China and emerging markets are not the only negative factors on Apple’s balance sheet this quarter. The company also reported a 10% drop in iPhone sales across all markets. Apple’s slow adoption of AI versus competitors like Google and Microsoft has also potentially played a role in slowing iPhone sales.
Despite the unimpressive hardware numbers, Apple managed to exceed Wall Street’s expectations. He also called for an increase in shares of more than 10% in after-hours trading, driven by both an increase in service revenue and a huge $110 billion share buyback, a jump from last year’s $90 billion purchase.
Investors on the call tried to get Maestri and Apple CEO Tim Cook to divulge more details about their upcoming generative AI launches, which Apple has teased in recent months, but the executives only revealed that the announcements were imminent.
We’ll be keeping an eye on Apple’s Worldwide Developers Conference for more news.