Gene Munster: Apple's iPhone Sales Rebound Not as Bad as Feared

Apple Inc. (AAPL) delivered better-than-expected fiscal first-quarter results, with revenue of $124.3 billion, up 4% year-over-year, and earnings per share (EPS) of $2.40, up 10% year-over-year. Despite concerns about declining smartphone sales in China, the tech giant managed to exceed analyst expectations. Gene Munster, managing partner at Deepwater Asset Management, weighed in on Apple's performance, suggesting that the "mess wasn't as big as it looked" in the numbers.



Munster pointed to channel inventory adjustments as a significant factor in the apparent slowdown in iPhone sales, particularly in China. He noted that about half of the weakness in China, where revenue declined 11%, was attributable to inventory management rather than underlying demand issues. This suggests that Apple's performance was not as poor as initially perceived, and the company's ability to manage its inventory and maintain strong demand for its products remains intact.



The company's installed base of active devices reached a new all-time high across all products and geographic segments, with CEO Tim Cook highlighting the role of Apple silicon in unlocking new possibilities through Apple Intelligence. Services revenue showed particular strength, growing to $26.34 billion from $23.12 billion year-over-year, representing about 20% of total sales.

Munster expressed optimism about iPhone sales reaccelerating by June, based on early uptake data in the U.S. This aligns with Apple's historical performance in the iPhone market, where new product launches and updates have typically driven sales growth. Additionally, the strength of Apple's ecosystem, with a 7% growth in the installed base to 2.2 billion devices, further supports the company's strong historical performance and market position.



In conclusion, Munster's assessment of Apple's Q1 2025 results aligns with the company's historical performance and market expectations. Despite concerns about declining smartphone sales in China, Apple managed to exceed analyst expectations and maintain its strong financial performance. The company's ability to manage inventory, maintain strong demand, and grow its ecosystem positions it well for future growth. Investors should continue to monitor Apple's performance and market trends as the company navigates the competitive landscape and continues to innovate in hardware and software.