SAN FRANCISCO - Apple on Monday reported shrinking quarterly and yearly profits, raising concerns over its recent down market debut into colorful iPhones.
Wall Street has been debating Apple's move into lower-cost smartphones because iPhones make up more than half of the company's profits. Apple's reported its gross margin was 37%, compared with 40% a year ago.
Apple reported sales of 33.8 million iPhones in its fourth quarter. Analysts were expecting Apple to report iPhone sales ranging 33 million to 36 million units in the quarter, ended Sept. 28. Apple was reported to have cut back on manufacturing of its colorful 5C because of lagging demand in the quarter.
Shares of Apple fell 2%, to $518.50, in after-hours trading.
Apple's once-dominant iPhones and iPads face fierce competition. Samsung and other manufacturers, whose smartphones and tablets run Google's Android, put pricing pressures on Apple's premium-priced wares in competition for consumers.
The gadget giant sold more than 9 million iPhones in the debut weekend of its 5S an 5C models, which went on sale Sept. 20.
Apple reported net income of $7.5 billion on $37.5 billion in revenue in the quarter, beating analyst expectations. Analysts on average were expecting Apple to report fourth-quarter net income of $7.2 billion on $36.9 billion in revenue, according to the survey of estimates from Thomson Reuters. Apple reported net income of $8.2 billion in the same period a year ago.
Forecasts were for Apple to report declining full-year net income of $36.8 billion compared with $41.7 billion a year ago.
Analysts will be watching Apple's growth potential in the current quarter as it heads into the all-important holiday shopping season. The company last week unveiled two new iPads, both going on sale in November.