Jan. 26--Apple Inc.'s revenue barely budged in its first quarter of 2016, confirming fears that the consumer tech giant -- which once seemed infallible -- is slowing down.
Strong sales in China as well as new products such as the Apple Watch and Apple TV saved the Cupertino, Calif., company from suffering a revenue decline. But Apple Chief Executive Tim Cook warned that "extreme" global economic fears are weighing on its business. It provided a wider sales forecast range than usual for the current quarter and said this could be the year's most bruising period.
For the three months that ended Dec. 26, the company recorded $75.9 billion in revenue last quarter, up 2% from $74.6 billion in the same quarter a year earlier.
Technology analysts and some investors had feared that iPhone sales would decline, but Apple managed to avoid a plunge there. Sales of its marquee phone, which account for two-thirds of company revenue, edged up 0.4%.
"Given the white knuckles ... we would characterize the overall headline performance as better than feared," said Daniel Ives, an analyst at FBR Capital Markets. But Apple still has "some more wood to chop over the coming quarters to give investors further confidence" that iPhone sales will pick up again.
Apple is running headfirst into a challenge that technology experts say is unlikely to change anytime soon: The number of people who can afford iPhones and don't already have one has quickly shrunk.
In the Americas, the company's overall revenue for last quarter was $29.3 billion, down 4%, or $1.3 billion, from a year earlier. Market research company Argus Insights said demand for the iPhone 6S almost evaporated after the handset went on sale in September in the U.S., forcing steep discounts as stores tried to push inventory. Apple, meanwhile, cut orders to suppliers.
Apple has managed to surprise before. But increasingly, analysts say the company is not going to exhibit much growth unless it can diversify its business or find ways to make the iPhone more affordable in emerging markets in Southeast Asia, Latin America and Africa.
"If you want one, you probably have one for now," said Tuong Nguyen of research firm Gartner. "If you don't, it's probably well out of your price range. They've hit their point where they have their users."
Cook told analysts Tuesday that he remains bullish.
"There's still a tremendous amount of people in the world who will buy smartphones, and we should be able to get our fair share" of purchasers, he said.
Cook continued to offer Apple's China strategy as a playbook for building customer bases in India and other growing markets.
Sales in China, up 14% from the previous year to $18.4 billion, made up for falling U.S. sales and slow growth in Europe.
About half of iPhone buyers in China were first-time buyers during the December quarter, Cook said. But Apple needs the Chinese economy to hold strong so its emerging consumer class will continue to snap up iPhones. The tech giant plans to have 40 stores open in China by the end of the year.
Apple stocks have been bruised in recent months on poor Chinese economic news and the fears about diminished iPhone demand.
Before the earnings announcement, the company's stock closed at $99.99, up 0.55%. Shares sank as much as 2.5% in after-hours trading.
Sales of iPad tablets and Mac computers -- Apple's two other significant revenue generators -- slipped last quarter, the company reported.
The earnings also underscore how much Apple relies on the iPhone. Unlike other tech rivals such as Google, Facebook and Microsoft, Apple isn't heavily invested in cloud computing, driverless cars, virtual reality or social media. On Tuesday's analyst call, Cook said virtual reality technology has cool applications, but he did not offer any specific plans.
Times staff writer David Pierson contributed to this report.
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