Apple Misses Wall Street's iPhone Sales Forecast, Shares Hammered


It wasn't long ago that Apple would report new quarterly records for iPhone and iPad sales and Wall Street would go nuts, in a good way. On Monday, however, record-setting revenue and iPhone sales weren't enough to keep some investors from rushing to jump ship.

In Apple's fiscal first quarter ended Dec. 28, the Cupertino, Calif.-based vendor saw revenue grow 5.6 percent year-over-year to $57.6 billion, an all-time high. Profit came in at $13.1 billion, or $14.50 per share, up 5 percent from last year's quarter. Wall Street analysts were expecting $57.47 billion in revenue and earnings of $14.09 per share.

The problem for Apple is that the Street's sales expectations for the iPhone, its biggest cash cow, were sky-high. That's because Apple released two iPhones during the quarter, the 5s and 5c, instead of just one. Plus, the holiday quarter usually means solid iPhone sales.

[Related: Apple Lands Deal To Bring iPhone To China Mobile's 763 Million Customers]

This year, Wall Street was expecting Apple to sell around 55 million iPhones in the holiday quarter. Instead, Apple sold 51 million iPhones, after selling 47.8 million iPhones during last year's quarter.

Apple also reported revenue guidance of $42 to $44 billion for its second quarter, and that fell well short of Wall Street's expectations of $46 billion. Investors didn't like the sound of this much, and Apple shares dropped nearly 8 percent at $506.70 in Monday after-hours trading.

On Apple's earnings call, CEO Tim Cook said iPhone sales in North America "contracted somewhat" during the quarter because Apple had trouble keeping up with demand for the top-of-the-line iPhone 5s.

Cook said iPhone sales during the quarter were impacted by carriers instituting stricter policies that force customers to complete their contracts before upgrading their devices. But this shouldn't be a problem beyond Apple's current quarter, he said.

The especially promising news, Cook said, is that iPhones are selling well in emerging markets. And Apple's landmark iPhone deal with China Mobile, the world's biggest carrier with more than 760 million customers, is poised to give iPhone sales an extended boost, he said.

Apple and China Mobile began selling the iPhone 5s and iPhone 5c on Jan. 17 in 16 Chinese cities. Apple expects to expand that to more than 300 cities in the country by the end of the year, according to Cook. "We've got quite the ramp-up in front of us," he said in the Q&A.

There were other bright spots for Apple, like iPad sales of 26 million during the quarter, compared to 22.9 million during last year's holiday quarter. Apple also sold 4.8 million Macs after selling 4.1 million last year.

For years, Microsoft used to report eye-popping revenue and profit figures that failed to move the stock. While circumstances are different, Apple is now in a similar position, offering up record-setting sales figures that aren't enough to satisfy Wall Street's voracious appetite for growth.

PUBLISHED JAN. 27, 2014