Apple announced Tuesday that quarterly sales fell in consecutive quarters for the first time since 2002 as demand slows for its smartphone lineup.

The world’s most valuable company sold 40.4 million iPhones, down from 47.5 million devices during the same period last year. That decline contributed to quarterly profit falling 27% to $7.8 billion and revenue dropping 15% to $42.4 billion.

Those figures narrowly beat Wall Street expectations, helping Apple shares jump 5% in after-hours trading after they closed Tuesday at $96.67.

As the pool of potential customers who don’t already own iPhones shrinks, Apple has found itself unable to live up to past quarters of blockbuster growth.


The Cupertino, Calif., company introduced a low-cost iPhone SE in March with the hope of courting new buyers and convincing existing customers that they needed to upgrade.

That phone helped boost sales in the quarter, and in an earnings call Chief Executive Tim Cook called its launch “very successful.”

But the iPhone SE’s cheaper price tag of $399 — the lowest-cost iPhone ever — helped push Apple’s gross margin down 1.7% from the previous year.

Sales of Mac computers and iPads declined, although iPad revenue grew 7% thanks to a new line of more expensive tablets. Revenue from the unit including the Apple Watch fell 16%.


Apple struggled in China, Hong Kong and Taiwan, where quarterly revenue fell 33% to $8.9 billion. A year prior, the company recorded a 112% surge in revenue in the region.

Apple said its services business — which includes iCloud, Apple Music and the App Store — saw sales jump 19% to almost $6 billion. Cook told CNBC that its services business would be “the size of a Fortune 100 company by next year.”

paresh.dave@latimes.com

Twitter: @peard33


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UPDATES:

3:00 p.m.: This article was updated with details from Apple’s quarterly earnings report.

This article was originally published at 12:20 p.m.