Apple predicts first fall in iPhone sales despite record £12.8bn profit

Apple is predicting its first fall in iPhone sales later this year despite reporting the largest single quarter profit in corporate history.

The US technology giant posted a profit of 18.4 billion US dollars (£12.8bn) for the quarter ending December 26, having sold 74.8 million iPhones in the three-month period.

But iPhone sales grew by just 0.4%, the slowest rate in the history of the Apple smartphone, and a huge drop compared with the 46% growth in the same quarter last year.

The company's performance was still enough to break the profit record set this time last year, with sales also up 56% on the last quarter.

Technology experts said the results showed Apple's "untouchable" brand was not immune to "smartphone fatigue" as the company failed to entice as many new customers with its latest iPhone features.

Apple chief Tim Cook said: "Our team delivered Apple's biggest quarter ever, thanks to the world's most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV.

"The growth of our services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices."

All analyst eyes were on Apple's guidance for the next quarter, and the company confirmed rumours that it would suggest a drop in revenue - offering guidance that the second quarter of 2016 would be between 50 billion and 53 billion US dollars (£35bn-£37bn), down from 58 billion (£40bn) in the same quarter last year.

The results also revealed that Apple sold just over 16 million iPads and 5.3 million Macs.

Luca Maestri, Apple's finance officer, said: "Our record sales and strong margins drove all-time records for net income and EPS (earnings per share) in spite of a very difficult macro-economic environment.

"We generated operating cash flow of 27.5 billion US dollars during the quarter, and returned over 9 billion US dollars to investors through share repurchases and dividends. We have now completed 153 billion US dollars of our 200 billion US dollar capital return programme."

Ernest Doku, technology expert at uSwitch.com, said: "Most companies would do cartwheels with those kind of numbers but it's Apple, so anything that's not astronomical growth is looked at with some fear and trepidation.

"Overall it's a great performance but shows consumer handset fatigue has set in across the board. In a space where there is so little to excite consumers, we're seeing even the biggest manufacturers feeling that pinch."

Mr Doku said Chinese technology firms Huawei and Oppo were "nipping at the heels" of Apple and other popular smartphone makers in the global market.

He added: "I wouldn't say it's the end of an era. Apple's brand is almost untouchable. But this shows even the biggest brands are not immune to smartphone fatigue. There needs to be a great deal more to excite consumers."

Kent German, from consumer technology website CNET, said: "Apple had a record quarter profit last year - any other company would be jumping up and down.

"But for the first time we're seeing iPhone growth slowing which reflects something going on in the whole market. The rate of smartphone adoption is slowing.

"So much of Apple's profit comes from the iPhone. They continue to add things that are interesting but it's not enticing people enough.

"The smartwatch market is still growing. But lots of people are still asking, 'Do I need one?'"