Apple’s executives projected relatively strong sales growth, indicating the company’s recovery from a dip in iPhone sales as it begins to roll out artificial intelligence (AI) features. After a slight decline in iPhone revenue during the holiday shopping quarter, which fell short of Wall Street estimates, Apple has made progress in its AI efforts, and investors are optimistic about the future. Tim Cook, Apple’s CEO, stated that these AI features will be available to more users in Europe this spring, leading to a 3.14% increase in shares during after-market trading.
Apple has adopted a more measured approach to AI compared to rivals like Microsoft, focusing on integrating AI features into its hardware rather than investing heavily in massive data centers. This strategy paid off when DeepSeek, a Chinese AI startup, introduced free AI technology that triggered fears of price wars, ultimately benefiting Apple as it helped boost its stock price.
While AI adoption has been slow, Apple saw stronger-than-expected sales in other product categories. The fiscal first quarter of 2024 showed a boost in sales for iPads and Macs, where new chips encouraged customers to upgrade. Apple’s fiscal second-quarter outlook remains positive, with expected sales growth in the low-to-mid single-digit range.
In the most recent quarter, iPhone sales slightly dropped to $69.14 billion, missing analysts’ expectations of $71.03 billion. Sales in Greater China also decreased, bringing in $18.51 billion, below the expected $21.33 billion. However, Apple’s total sales of $124.30 billion exceeded Wall Street’s expectations of $124.12 billion, with earnings per share of $2.40 surpassing the consensus target of $2.35.
Apple has positioned AI as a set of new features, such as drafting emails and transcribing phone calls, but is gradually rolling them out. Tim Cook stated that markets where Apple Intelligence has been launched have seen stronger iPhone 16 family sales compared to those without it. While the AI features are expected to roll out in French and German in April, there is no timeline for availability in China due to regulatory concerns.
Mac sales benefitted from new models, including Mac Minis, iMacs, and MacBook Pros with the new M4 chip. The availability of Apple Intelligence on Macs and iPads, which have more powerful chips, has been a driving factor for upgrades. Apple’s services business, including iCloud, streaming, and other services, saw a 13.9% year-over-year increase, reaching $26.34 billion.
Despite criticism over the slow rollout of AI features, Apple’s services growth and ecosystem expansion are helping offset iPhone struggles, particularly in China. The wearables segment, including the Apple Watch and AirPods, posted $11.75 billion in sales, slightly below analysts’ expectations of $12.01 billion.