Apple Inc’s artificial intelligence (AI)-enhanced iPhone made a strong start, pushing quarterly sales ahead of analysts’ expectations, but a modest revenue forecast raised questions about whether that momentum would hold over the holiday sales season.
A decline in China sales during the fourth quarter also concerned some analysts and investors, helping send shares down 1.4 percent in after-hours trade, despite surprisingly large overall profit and revenue in that period.
Apple chief financial officer Luca Maestri told analysts during a conference call that Apple expects overall revenue to “grow low to mid-single digits” during its fiscal first quarter, which ends next month.
Photo: Reuters
Analysts had expected revenue growth of 6.65 percent to US$127.53 billion during the quarter, LSEG data showed.
Apple did say it expects double-digit growth in its services business in its fiscal first quarter, leading some analysts to ask executives during a call if overall hardware revenue might decline.
Executives did not address that question, or give any indication of how the iPhone might fare, including in China, where Apple’s new AI features are not available.
Apple has not said when they would be available.
Prior to management’s call with analysts, Maxim Group analyst Tom Forte attributed Apple’s share drop to fourth-quarter China sales coming in below expectations.
“We see the potential for sustained weakness in China,” he said.
Apple said overall fourth-quarter sales were US$94.93 billion, ahead of analysts’ forecasts of US$94.58 billion, LSEG data showed.
Earnings of US$1.64 per share, excluding a massive one-time tax charge in the EU, topped analysts’ expectations of US$1.60 per share.
Fourth-quarter sales of Apple’s iPhone, the company’s main product, were up 5.5 percent to US$46.22 billion, compared with analysts’ estimates of US$45.47 billion. Other product lines missed expectations.
Apple’s fiscal fourth quarter ended on Sept. 28, meaning it reflects only a few days of sales of its iPhone 16 series that went on sale Sept. 20.
Apple CEO Tim Cook told Reuters that iPhone 16 sales grew faster than iPhone 15 sales did a year earlier, with both phones on sale for the same number of days in the fourth quarter.
Cook also said Apple customers are downloading a new version of its iPhone operating system with what it calls Apple Intelligence features at twice the rate they had the year before.
“We’ve had great feedback from customers and developers already,” Cook said. “We’re off to a good start.”
The rollout of Apple’s AI strategy, which it revealed this year, hinges on how well its new phones sell.
Rather than introduce AI in a standalone app or service, Apple has sprinkled Apple Intelligence throughout its most recent operating systems as new features, such as the ability to help rewrite an e-mail in a more professional tone. Those features will mostly be available on iPhone 16 models, which feature more powerful computing chips, although the pro versions of the iPhone 15 both work with Apple Intelligence. While some of those Apple Intelligence features arrived this week, others have been delayed, which has led some Wall Street analysts to wonder whether consumers would be slower to upgrade their devices this year while flagship software features trickle out.
“There would be some [financial] benefit to us by using our own silicon, obviously, but that’s not the reason we’re doing it. We’re doing it because we can provide the same standard of privacy and security that we can provide on device,” Cook said.
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