Apple Looks to AI for iPhone Boost Amid China Sales Dip
Apple reports better-than-expected iPhone sales in Q3. Anticipates growth with AI-driven iPhone upgrades. China sales decline while AI-focused iPad sales surge.
In extended trading, Apple's shares surged nearly 1%, surpassing a general decline in tech stocks.
The tech giant is gearing up to unveil its most significant software update for the iPhone this autumn, incorporating advanced artificial intelligence features. This move comes as competitors like Samsung have been quick to introduce comparable services.
Apple expects revenue to rise at a rate similar to the 4.9% increase seen in the April-June period, above analysts' expectations.
iPhone sales improved in the third quarter, falling only 0.9% compared to analysts' expectations of a 2.2% loss.
Chief Financial Officer Luca Maestri stated his delight with the iPhone's performance, citing the success of the iPhone 15 series over its predecessor.
Despite a 6.5% drop in sales in China, Apple remains enthusiastic about its performance, particularly given the country's economic woes. To compete with local rivals such as Huawei, the Apple has turned to offering iPhone discounts in China.
Analysts forecast a strong upgrade cycle, with the iPhone 16 series set to ship in September. During its developer conference in June, Apple unveiled a suite of AI products and services dubbed Apple Intelligence.
To gain access to Apple Intelligence, buyers will require at least an iPhone 15 Pro, which may drive upgrades.
While some customers may have purchased premium iPhone 15 models in anticipation of Apple Intelligence features, CEO Tim Cook is wary about attributing upgrades purely to one aspect.
Apple's move into AI comes after competitors such as Samsung Electronics have already released AI-powered gadgets. Other tech giants such as Microsoft and Google are also making significant investments in AI technologies.
Emarketer analyst Jacob Bourne underlined the importance of Apple keeping AI development expenses low and ensuring that new AI features entice price-sensitive consumers to upgrade their devices.
According to Cook, Apple's R&D investment has climbed dramatically over the last five years, topping $100 billion.
Despite the expenditures involved with AI applications, Apple's gross margins remain solid. The company's AI infrastructure costs are split between its data centres and leased cloud providers.
On the regulatory front, Apple is under investigation in the EU under the Digital Markets Act, with claims of breaking the regulations. In the United States, the Department of Justice has accused Apple of monopolistic activities in the smartphone industry.
Apple's quarterly earnings per share surpassed Wall Street expectations by $1.40. Sales in the services division, which includes the App Store, Apple Music, and TV items, exceeded analysts' forecasts.
Mac sales increased modestly, while iPad sales skyrocketed on the release of new AI-powered models. Wearables sales, which include Apple Watches and AirPods, were slightly down.
Apple has kept its dividend at 25 cents and launched a US$110 billion stock repurchase for the fiscal second quarter.
Apple reports better-than-expected iPhone sales in Q3
Anticipates growth with AI-driven iPhone upgrades
China sales decline while AI-focused iPad sales surge
Source: REUTERS