When a Covid-19 outbreak in China pressured a lockdown of Apple’s largest iPhone manufacturing facility in November, the world’s most precious firm warned traders that it will lose gross sales. The query was: How a lot?

On Thursday, Apple reported that income fell 5 p.c to $117.15 billion throughout the three months that resulted in December, the corporate’s first quarterly gross sales decline since earlier than the pandemic. Earnings decreased 13 p.c to $30 billion.

Apple’s outcomes are the newest proof of the challenges buffeting the tech trade. After recording double-digit gross sales beneficial properties throughout the early pandemic, firms have just lately shifted to value chopping and mass layoffs, with Microsoft, Amazon and Alphabet — Google’s mum or dad firm — every eliminating no less than 10,000 jobs.

A much less extreme whiplash has hit Apple. From 2020 to 2022, the corporate elevated its annual income by practically $125 billion. However demand for iPhones, iPads and Macs has slowed, inflicting traders to bitter on the corporate. Over the course of a yr, Apple misplaced $1 trillion in market worth, a surprising reversal for the one U.S. firm to ever attain a valuation of $3 trillion.

The corporate’s shares declined about 4 p.c in after-hours buying and selling, reversing a lot of the beneficial properties from earlier within the day when tech shares rallied following Meta’s earnings report on Wednesday. Wall Avenue had anticipated $122 billion in gross sales and $31 billion in revenue.

Although its enterprise has slowed, Apple hasn’t moved to chop jobs. In contrast to a few of its friends, corresponding to Google and Meta, which aggressively employed throughout the first years of the pandemic to maintain up with demand, Apple remained disciplined, including 24,000 new staff, simply 3,000 greater than it added within the three years earlier than 2020.

Nonetheless, many traders have decreased their stakes in Apple out of concern its enterprise shall be hit by the slowing financial system. Client spending in america, Apple’s largest market, has declined, posing a possible problem to gross sales of dear iPhones.

“It’s impacting the upper finish client’s willingness to spend and that’s going to influence probably the most useful firm on the planet,” mentioned Dave Wagner, a portfolio supervisor at Aptus Capital Advisors, which has about $5 billion beneath administration and an funding in Apple.

Apple recorded $65.78 billion in iPhone gross sales, an 8 p.c decline from the earlier yr. The modest decline testified to the corporate’s provide chain acumen. After the corporate shut down its greatest iPhone manufacturing facility in November, it shifted some manufacturing to different factories, in accordance with Counterpoint, a market analysis agency.

On the gross sales entrance, Apple benefited as extra iPhone patrons selected its dearer Professional fashions, lifting the typical promoting value 9 p.c to $936, in accordance with Counterpoint.

Apple offset its iPhone struggles with elevated gross sales of its iPads and providers. The corporate mentioned its iPad enterprise recorded $9.4 billion in gross sales, a 30 p.c improve. It elevated gross sales of apps and subscription providers corresponding to Apple Music to $20.77 billion, about 6 p.c from the earlier yr.

The corporate’s greatest problem stays its concentrated provide chain in China. The faltering of U.S.-China relations has accelerated, with Congress making a particular committee this yr to judge competitors with Beijing. Issues are additionally mounting in Washington that China may quickly take navy motion towards Taiwan.

Amid the rising tensions, Apple has shifted manufacturing from China to Vietnam and India. However a overwhelming majority of its income continues to come back from merchandise made in China. And Chinese language customers depend for a few fifth of whole gross sales.

In the course of the December interval, gross sales in China fell 7 p.c to $23.9 billion. Apple’s enterprise there ought to enhance within the present interval as China’s financial system reopens after years of strict Covid-19 restrictions. Analysts predict gross sales within the present quarter will decline about 4 p.c.