Apple missed Wall Street's revenue forecast for the third straight quarter after iPhone sales came in below expectations, fanning fears that its dominance of consumer electronics is slipping.
Shares of the world's largest tech company fell 10 per cent to $463 in after-hours trade, wiping out some $50 billion of its market value - nearly equivalent to that of HP and Dell combined.
On Wednesday, Apple said it shipped a record 47.8 million iPhones in the December quarter, up 29 per cent from a year earlier. But that lagged the 50 million that analysts on average had projected.
It's still one of the strong players, the others being Samsung and Google.
Expectations heading into the results had been subdued by news of possible production cutbacks by some component suppliers in Asia, triggering fears that demand for the iPhone, which accounts for half of Apple's revenue, and the iPad could be slowing.
But some investors clung to hopes for a repeat of years of historical outperformance, analysts said.
"It's going to call into question Apple's dominance in the space. It's still one of the strong players, the others being Samsung and Google. It's still a two-horse race, but Android continues to grow rapidly," said Sterne Agee analyst Shaw Wu.
"If you step back a bit, it's clear they shipped a lot of phones. But the problem is the high expectations that investors have. Apple's conservative guidance highlights the concerns over production cuts coming out of Asia recently."
Apple is forecasting revenue of $41 billion to $43 billion in the current, second fiscal quarter, lagging the average Wall Street forecast of more than $45 billion.
Fiscal first-quarter revenue rose 18 per cent to $54.5 billion, below the average analyst estimate of $54.73 billion, though earnings per share of $13.81 beat the Street forecast of $13.47, according to Thomson Reuters I/B/E/S.
Apple also undershot revenue targets in the previous two quarters, and these results will prompt more questions on what Apple has in its product pipeline, and what it can do to attract new sales and maintain its growth trajectory, analysts said.
Net income of $13.07 billion was virtually flat with $13.06 billion a year earlier on higher manufacturing costs. The year-ago quarter also had an extra week compared to this year.
Gross margins consequently slid to 38.6 percent, from 44.7 percent previously.
"You can't just keep rolling out iPhones and iPads and think that everybody needs a new one," said Jeffrey Gundlach, who runs DoubleLine Capital LP, the $53 billion bond firm.
"The mini? What is that all about? It is a slightly smaller iPad so what? So that is our new definition of innovation?"
"There are plenty of competitors like Samsung and other legitimate competitors like them," added Gundlach, one of the highest-profile Apple bears. He maintains a $425 price target.
Taking into account the drop in shares in Wednesday's after-hours trading, Apple's stock is now down 34 per cent from its September record high and the company has lost about $227 billion in market value.
Shares of several of Apple's suppliers crumbled. Chip suppliers Skyworks and Cirrus Logic both fell more than 6 percent. Qualcomm Inc slipped 1.8 percent.
Increased competition
Intense competition from Samsung's cheaper phones - powered by Google's Android software - and signs that the premium smartphone market may be close to saturation in developed markets have also caused a lot of investor anxiety.
Meanwhile, sales of the iPad came in at 22.9 million in the fiscal first quarter, roughly in line with forecasts.
On the brighter side, chief financial officer Peter Oppenheimer told Reuters that iPhone sales more than doubled in greater China - a region that Apple Chief Executive Tim Cook has vowed to focus on as its next big growth driver.
The company will begin detailing results from that country going forward. Revenue from the region totaled $7.3 billion, up 60 percent from the year-ago December quarter.
"These results were OK, but they definitely raised a few questions," said Shannon Cross, analyst with Cross Research. "Gross margin trajectory looks fine so that's a positive and cash continues to grow. But I think investors are going to want to know what Apple plans to do with growing cash balance."
"And other questions are going to be around innovation and where the next products are coming from and what does Tim Cook see in the next 12 to 18 months."
