Apple’s chief financial officer, Luca Maestri, played down investor concerns about an 8 percent drop in China revenue, noting that sales in other emerging markets are growing.
“When we start looking at places like India, like Saudi Arabia, like Mexico, Turkey, Brazil… and Indonesia, the numbers get big and we’re very happy because these are markets where our market share is [currenttly] low,” Maestri said Thursday during Apple’s second-quarter earnings conference call.
Revenue fell to $16.37 billion in China in the second quarter
“The populations are large and growing, and our products are really making great strides in these markets,” Maestri continued. “The level of excitement for the brand is very high.”
One thing Maestri said is verifiable: the populations in emerging markets are, in fact, large and growing. However, Apple’s growth in these areas is not as rosy as the executive tried to paint, according to 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 percent 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 product hype.
Maestri noted that Apple has introduced several financing solutions and trade-in programs that “lower the affordability threshold” so that customers can buy into the top-of-the-line product line.
“This is very valuable for us in developed markets, but particularly in emerging markets where affordability issues are most acute,” said Maestri.
However, pointing to the beacon 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 hotly contested battleground with domestic companies such as Oppo and Xiaomi dominating the market. According to Counterpoint Research, Huwaei has seen a huge swing in the country after being completely sidelined by US sanctions. The company’s phone sales rose nearly 70% from a year earlier, while Apple’s fell 19%. In September 2023, Beijing imposed iPhone bans for government officials in the workplace, echoing US action against Huawei.
China and emerging markets aren’t the only downgrades 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 rivals like Google and Microsoft has also played a role in slowing iPhone sales.
Despite the unimpressive hardware, Apple managed to beat Wall Street’s expectations. It also caused stocks to rise more than 10% in after-hours trading, fueled by both service revenue growth and a massive share buyback of $110 billion — a jump from last year’s $90 billion buyback.
Investors tried to get Maestri and Apple CEO Tim Cook to reveal more details about the upcoming AI launches, which Apple has teased in recent months, but executives revealed only that announcements are imminent.
We’ll keep our eyes peeled for Apple’s Worldwide Developers Conference for more news.
