Apple sells fewer iPhones in its second fiscal quarter

Apple reported falling iPhone sales in its fiscal second quarter, showing why it’s urgent the company make significant upgrades to the next version of the flagship device to contend with rivals like Samsung Electronics.

The company also forecast $43.5 billion (all figures US) to $45.5 billion in revenue for the current quarter, below analysts’ estimates of $45.7 billion.

Investor confidence has been mounting ahead of a major upgrade to the iPhone due later this year. Yet competitors such as Samsung and LG Electronics released new high-end smartphones recently, exacerbating the need for Apple to deliver a device that matches or exceeds consumer expectations.

Apple sold 50.8 million iPhones in the March quarter, down from 51.2 million units in the same period a year earlier, and fewer than the 51.4 million predicted in a Bloomberg survey of analysts.

Apple also announced $50 billion in new share buybacks and a 63-cent dividend. The company had already announced $175 billion in repurchases, helping maintain the stock price in lulls between new products.

Much is riding on the success of the iPhone 8. Smartphone sales growth has been slowing and Apple has lost market share in China, a major source of growth before last year, amid increased competition from local rivals.

Apple benefited from Samsung’s recall of its Galaxy S7 smartphone last year, but the South Korean company followed up with the introduction of the well-reviewed Galaxy S8 in April. If S8 sales are strong, that may mean fewer new customers for the new iPhone and the services businesses that feed of the device.

Chief executive officer Tim Cook has repeatedly sought to highlight Apple’s services business, the fastest growing part of the company last year.

Sales of offerings like iCloud, the App Store and Apple Music grew 18 per cent to $7.04 billion in the quarter. Apple said earlier this year that it aims to double annual services revenue to more than $50 billion by fiscal 2021.