Apple failed to meet expectations for revenue, profit, and sales across multiple business lines in the fiscal first quarter of 2023, reports CNBC. Apple’s overall sales for the holiday quarter were about 5% lower than last year, the first year-over-year sales decline since 2019.

Apple CEO Tim Cook said the results were driven by three factors: a strong US dollar, manufacturing issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment.

Apple shares fell more than 4% in after-hours trading on Thursday but then increased after the tech giant presented data on its current quarter outlook. The company’s data suggests that iPhone sales will not decline as quickly as they did in the holiday quarter.

Here’s how Apple did against Refinitiv’s consensus expectations:

Earnings per share: $1.88 vs. $1.94 estimated, down 10.9% year-over-year;
Revenue: $117.15 billion vs. $121.10 billion estimated, down 5.49% year-over-year;
iPhone revenue: $65.78 billion vs. $68.29 billion estimated, down 8.17% year-over-year;
Mac revenue: $7.74 billion vs. $9.63 billion estimated, down 28.66% year-over-year;
iPad revenue: $9.4 billion vs. $7.76 billion estimated, up 29.66% year-over-year;
Other products revenue: $13.48 billion vs. $15.23 billion estimated, down 8.3% year-over-year;
Revenue from services: $20.77 billion versus $20.67 billion estimated, up 6.4% year-over-year;
Gross margin: 42.96% vs. 42.95% forecast.

Apple did not provide guidance for the current quarter ending in March. The company has not provided forecasts since 2020, initially citing uncertainty caused by the pandemic. Analysts had expected the company to target about $98 billion in sales in the fiscal second quarter.

However, Apple has provided some data on the expected performance. CFO Luca Maestri said that revenue in the March quarter will follow the same downward trend as in the December quarter. According to Maestri, services are expected to grow, but Mac and iPad sales are expected to decline by double digits compared to last year. iPhone sales will decline less in the March quarter compared to the December quarter, Apple added.

This quarter was a stunning failure for Apple and the first in nearly seven years that the company’s earnings did not meet consensus expectations. In fact, it was only the second earnings miss since August 2017, when sales came in more than 3% below consensus expectations.

It was also a regression from Apple’s success over the past two years, driven by the need for new computers for home work and study. It was Apple’s first year-over-year drop in quarterly revenue since 2019 and the biggest drop in annual quarterly revenue since September 2016.

Cook told CNBC that the miss was partly due to the strong U.S. dollar and added that shipments of the iPhone 14 Pro and iPhone 14 Pro Max dropped significantly during the quarter, meaning there were fewer phones to sell to customers. The main iPhone manufacturing plant in China was hit by Covid restrictions during the quarter, which investors were warned about in November.

Apple’s CEO said that production has now returned to a level that suits the company.

However, the report did offer some positives for investors. First, Apple reported that it has 2 billion active devices, including iPhones, Macs, the Apple Watch and other products, up from the 1.8 billion active devices it reported last January.

The number is important to investors because it summarizes the company’s global reach and points to growth potential if the company can better monetize those customers with services or other complementary products.

In addition, iPad sales grew nearly 30% year-over-year after the company released a low-cost tablet model as well as a new top-of-the-line iPad Pro model during the quarter. This is a positive trend in Apple’s hardware business, which reversed the situation in December last year when revenues from sales of Mac computers rose sharply and revenues from sales of iPads fell.

In other positive news for investors, Apple reported a 6% growth in its services business, beating analysts’ expectations.

Management said cloud services, payments including Apple Pay and Apple Card, and music were strong components of services. Cook added that Apple employees are beta-testing the buy-now-pay-later feature that will become part of the services. “It will be launched soon,” he added.

Cook also said Apple is cutting costs and slowing hiring. At the same time, the company did not announce layoffs, unlike many competing technology firms.