As Apple heads into the critical sales period of the year, new concerns have emerged, disappointing investors regarding revenue growth and ongoing weakness in the highly competitive Chinese market.

Following its quarterly earnings report, Apple stated that overall sales for the December period would grow at a low-to-mid single-digit percentage, falling short of analysts’ projections of 7% growth. The company also reported a revenue drop in China last quarter, missing expectations.

According to Bloomberg, Apple is still working to recover from one of its biggest sales declines in history. Revenue had fallen for four consecutive quarters in fiscal year 2023 but stabilized in the last two. Although Apple remains the world’s most valuable company, it faces a sluggish smartphone market, more competition in China, and regulatory scrutiny worldwide.

These concerns pushed shares down about 2% in recent trading. The stock had risen 17% this year, driven by optimism about Apple’s AI prospects.

Overall revenue exceeded Wall Street’s expectations last quarter—helped by global demand for the iPhone—but the results indicate persistent challenges in a key market.

Apple is competing with local brands in China, which serves as its primary manufacturing hub. Revenue in the region slightly declined compared to a year earlier, reaching $15 billion in the fourth fiscal quarter ending September 28, versus analyst estimates of $15.8 billion.

CEO Tim Cook stated that iPhone sales grew in every geographic region, suggesting that Apple’s other product lines may be the issue in China, Apple’s largest revenue source after the U.S. and Europe.

Total sales rose 6.1% to $94.9 billion, compared with an average estimate of $94.4 billion. Earnings were $0.97 per share, although they would have been $1.64 without a one-time charge related to a European General Court ruling, according to Apple.

The Cupertino, California-based company introduced the iPhone 16 in September, boosting upgrades. It also updated the Apple Watch and launched new AirPods, which together account for the majority of its revenue.

Investors are betting that Apple Intelligence, the company’s new AI suite, will drive device sales. However, the software debuted weeks after the iPhone release, and many of its most significant features are still months away.

Apple had previously indicated that sales growth would be about 5%, with strong performance in its services sector. Revenue from this segment reached a record high of $25 billion this period, though it was slightly below Wall Street’s forecast of $25.3 billion.

During an analyst call, CFO Luca Maestri said services revenue would grow by double digits in the December quarter, consistent with fiscal year 2024.

iPhone revenue reached $46.2 billion, surpassing the $45 billion estimate, up 5.5% from a year earlier. The business could gain a new boost in 2025 when Apple plans to release a low-end iPhone SE with Apple Intelligence, along with major hardware updates to its flagship models.

However, other product segments fell short of analyst expectations last quarter, including the iPad and wearables divisions. Mac revenue was $7.74 billion, meeting projections.

Apple hadn't launched significant updates to its Mac line until the current quarter, aside from a MacBook Air refresh with an M3 chip earlier this year.

This week, Apple added the M4 chip line to its iMac, Mac mini, and MacBook Pro—setting up Mac for a strong holiday season. Next year, Apple plans to bring the M4 chip—a processor designed to accelerate AI processing—to the MacBook Air, Mac Studio, and Mac Pro, Bloomberg News reported.

The iPad series saw sales of $6.95 billion, missing the $7.07 billion forecast. After about 18 months without changes, Apple refreshed the iPad this year, introducing the iPad Pro with the M4 chip and a larger iPad Air. Earlier this month, it updated the iPad mini with a new chip and support for Apple Intelligence, though these sales were not included in the fourth fiscal quarter.

Apple plans another push for the iPad in the first half of next year with a new low-cost model targeted at students.

The company updated its Wearables, Home, and Accessories line in September with the Apple Watch Series 10 and a new black version of the Ultra 2 watch, also debuting two models of AirPods 4.

But these relatively modest changes didn't significantly boost sales. The segment earned $9.04 billion, down 3% from a year earlier, compared with analysts' estimates of $9.17 billion.

Apple Intelligence remains a question mark. Only a small portion of the platform’s features have been delivered so far, making it difficult to predict its long-term impact on demand.

In December, Apple will integrate OpenAI’s ChatGPT into its software and introduce generative AI image-editing features. A revamped Siri won’t arrive until next year.

Though Apple’s services business has been a bright spot, it also faces challenges. The App Store is under fire in various parts of the world, including the EU, where new regulations require policy changes. Apple now permits third-party app stores and payment methods in the region, which could impact revenue.

Apple has also struggled to find its next “big thing”—a major new category to drive growth. The Vision Pro headset, introduced in February, has so far been a niche product, and the company scrapped its car development plans the same month.

However, Apple is making a new push in the smart home market with devices featuring robotics and AI—and is working on developing more affordable headsets.