Apple's first quarter of negative income growth since 2003
It ends this week. Investors might as well get ready for the negative headlines. — FORTUNE — The bad news is that every analyst we've surveyed — even the most bullish — believes that for the first time in a decade Apple …
Context & Ripple Effects
The last time Apple's sales trajectory was seriously questioned, in February 2009, an analyst argued that falling Mac and iPod sales were survivable — and they were, followed by four years of record quarters. Now every analyst Fortune has surveyed, including the most bullish, expects the quarter Apple reports this week to post the first year-over-year income decline since 2003.
The stall lands during a bruising stretch: Apple closed its acquisition of indoor-location startup WiFiSLAM within the past week, its marketing chief was forced into public remarks on the eve of Samsung's Galaxy S4 launch amid analyst criticism that the company's silent strategy lets rivals drive the narrative, and the iTunes Store approaches its 10th anniversary with its long-stated break-even aim under severe pressure as the business scales.
First-order effects
- Apple's fiscal Q2 report this week converts the expected decline into a hard number — after a decade of unbroken growth, the headline itself becomes the story, and investor focus shifts from expansion to margins and product cadence.
- Samsung's Galaxy S4 announcement window overlaps the earnings report, letting the rival frame the comparison while Apple's minimal-marketing posture keeps drawing criticism that it is losing the war of words.
Second-order effects
- With income growth off the table, attention turns to high-margin services: the iTunes Store's break-even commitment strains as volume grows, forcing a trade-off between content economics and gross margin.
- The WiFiSLAM purchase reads as Apple buying differentiation in software features rather than competing on hardware specs — the response available to a company that can no longer win simply by posting bigger numbers.
Third-order effects
- If the pattern holds, Apple reprices from a hypergrowth story into a mature hardware franchise whose value rests on upgrade cycles and ecosystem lock-in rather than category creation — the same debate that surfaced in 2009 over Mac and iPod declines, now applied to the whole company.
- A consensus in which even bullish analysts accept a down quarter marks a regime change on Wall Street, pressuring Apple either to open new product categories or to defend profitability more visibly than its historical secrecy allowed.
The trend: A decade of Apple's uninterrupted profit growth is closing as the smartphone market matures and competitors like Samsung seize the narrative pace.