Reuters reports that Apple executives have forecasted a relatively strong growth in sales, indicating that the company will recover from a decrease in iPhone sales as it introduces artificial intelligence features.
The forecast was made after a slight decrease in iPhone revenues for the holiday shopping quarter, and underperformed according to Wall Street estimates due to the absence of artificial intelligence features that are primary selling points among the latest devices.
Tim Cook, Chief Executive of Apple, stated that these features will be accessible to more users in Europe this spring, and shares increased to 3.14% in post-market trade.
Apple has integrated AI via a more cautious attitude as compared to its peers, avoiding huge data center spending like Microsoft. Rather, the company envisioned AI as features that would play a complementary role in selling its latest hardware.
This approach to AI adoption paid off earlier this week when China’s DeepSeek revealed free AI technology that triggered fears of price wars, dropped stocks of Apple’s competitors, and increased Apple’s shares.
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Despite the decrease in the integration of AI, Apple’s sales and profits were boosted more strongly than expected sales in its fiscal first quarter of iPads and Macs. The new chips persuaded customers to upgrade.
CFO Kevan Parekh has a much more optimistic view on the current fiscal Q2 than had previously been expected, as the company anticipates sales will increase in low to mid-single digits, taking into account a negative -2.5 percentage point impact from a strong U.S dollar. “The guidance management provided during the call was better than expected due to iPhone momentum and Apple working through a challenging Q4 in China.” “iPhone sales were lower than expected last quarter at $69.14 billion versus analyst expectations of $71.03 billion (LSEG),” said D.A. Davidson Managing Director Gil Luria.
“Greater China iPhone sales were also under the prior year and below estimates at $18.51 billion versus the prior year $20.82 billion and the Visible Alpha survey’s 5 analysts’ estimate of $21.33 billion.”
“Total sales for fiscal Q1, ending 12/28/2023, of $124.30 billion exceeded Wall Street’s consensus estimate of $124.12 billion (LSEG) while EPS of $2.40 exceeded the consensus estimate of $2.35.”
Apple, the iPhone maker, has positioned itself as a set of new features and capabilities, like transcribing phone calls and drafting emails. However, the company is integrating these features over time and has not yet identified a local partner for releasing them in China.
In an interview, Tim Cook confirmed that increasing sales and revenue among iPhones is attributed to the integration of AI features, as the markets with AI-integrated iPhones 16 performed better than the iPhone without AI features.
He further added that Apple intelligence is soon coming in the form of new languages like German and French. Moreover, he informed that soon AI-integrated iPhones will be available in China as they are currently negotiating with regulators.
Cook informed that 11% of decrease in China revenue is attributed to changes in how much inventory the company’s resellers held.
Mac sales also increased during the last quarter due to the launch of new lines, including iMacs, Mac Minis, and MacBook Pros with a new M4 chip. Apple Intelligence features are more widely available on iPads and Apple Macs, as larger sizes mean more powerful chips.
This is the reason that Apple’s Mac and iPad sales rose to $8.99 billion and $8.09 billion against the LSEG estimates of $7.96 billion and $7.32 billion.
The service business of Apple, including iCloud storage and streaming videos and music services record sales of $26.34 billion, an increase of 13.9% as compared to the previous year and above the LSEG estimates of $26.09 billion.
Emarketer analyst Jacob Bourne states that although the company’s cautious approach towards AI launch and integration has been criticised heavily, the robust services growth and ecosystem expansion are providing strong momentum to address iPhone’s ongoing struggles in China.
