Apple Inc. marked a pivot to revenue growth last quarter, lifted by the long-awaited arrival of new iPads. As per Apple iPhone sales for Q3 were better than expected and forecast more gains on Thursday as it bets on artificial intelligence to attract buyers. This is even as Apple’s business in China market disappoints.
Apple is expected to launch this fall what analysts have called the biggest software upgrade for the iPhone. It includes AI features and comes at a time when rivals such as Samsung have been quicker to roll out similar services.
Apple increased revenue
Apple said revenue in its fiscal fourth quarter would grow at a level similar to the 4.9% increase it posted in the April-June period, which was better than analysts’ estimates.
Improved Apple iPhone sales
Apple iPhone sales have also improved in the Q3, falling just 0.9% compared with the 2.2% drop analysts expected.
As per CFO Luca Maestri the iPhone results were better than he had expected three months ago. “The iPhone 15 family has been doing well from the very beginning and still now – we have three quarters of the year behind us. It is performing better than the previous cycle, the iPhone 14.”
Apple’s biggest worry China market
China which is Apple’s third-largest market remained a drag as sales there declined 6.5%. While that was an improvement from the 8.1% decline in the previous quarter, it was wider than expectations for a drop of 2.4%, according to Visible Alpha.
Maestri said China sales fell less than 3%, excluding the effects of foreign exchange and added that he feels good about Apple’s performance in that country, given any softness in its economy.
Why the fall of iPhone in China?
There are much cheaper alternative smartphones offered by local competitors such as Huawei (HWT.UL). Apple has taken to discounting its iPhones in China to compete with theM. The company in May offered discounts of up to 2,300 yuan ($317) on selected models.
A turnaround with Apple Intelligence
Analysts expect a strong upgrade cycle for the iPhone 16 series, likely to be launched in September. The company unveiled a raft of AI products and services it calls Apple Intelligence at its developer conference in June.
To operate Apple Intelligence requires at least an iPhone 15 Pro, which may push consumers to upgrade their devices.
Apple’s AI features have arrived later than offerings by rivals including Samsung Electronics, which has introduced competing devices aimed at hosting AI chatbots. Microsoft and Alphabet’s Google are placing huge bets on AI as well.
Apple sales more upbeat in service sector
Sales in Apple’s services segment, which includes the App Store and represents Apple Music and TV products, rose 14.1% to $24.21 billion, above analyst expectations of $24.01 billion, according to LSEG data.
Mac sales grew 2.5% to $7.01 billion, compared with estimates of $7.02 billion, according to LSEG data.
Apple’s sales in the iPad segment increased by 23.7% to $7.16 billion, above analyst expectations of $6.61 billion. This was after Apple launched a new AI-focused iPad Pro and a larger iPad Air in May.
The wearables segment, which represents sales of Apple Watches and AirPods headphones, sales fell 2.3% to $8.10 billion, compared with analyst estimates of $7.79 billion, according to LSEG data.
Apple stock update
Shares of Apple rose nearly 1% in extended trading, outperforming other tech stocks that were broadly lower. Apple maintained its dividend at 25 cents. In the fiscal Q2, Apple announced a $110 billion stock buyback. Apple stock rallied after the firm outlined its goals and teased upcoming features during its annual WWDC conference. In contrast, Wall Street responded poorly to Google’s vague commentary on how it will justify the tens-of-billions it’s sinking into AI.
