Apple (AAPL) recently reported strong fiscal Q4 results, achieving $94.93 billion in revenue, a 6% increase year-over-year, and a 12% rise in adjusted earnings per share to $1.64.
Yet, shares fell 1.7% due to modest guidance for its December quarter. The tech giant’s forecast of low- to mid-single-digit revenue growth fell short of Wall Street's 7% expectations, hinting at slower iPhone demand growth. Analysts partly attribute this slowdown to a gradual iPhone 16 upgrade cycle, as consumers await Apple’s highly anticipated AI features.
Dubbed "Apple Intelligence," Apple’s generative AI suite represents a significant focus of its recent product strategy, particularly as its adoption rates outpace previous iOS versions. Despite this progress, some analysts view the rollout as conservative. UBS’s Wamsi Mohan suggests Apple may have intentionally tempered expectations, rating the stock a “buy” with a $256 price target. This sentiment is echoed by Morgan Stanley’s Erik Woodring, who sees upside potential as Apple prepares for the next iPhone cycle. However, iPhone growth may be slow to materialize, especially as Apple faces headwinds in China’s competitive smartphone market, with domestic brands like Huawei gaining ground.
Mixed Results for Apple's Hardware and Services Segments
Apple’s Q4 results highlighted mixed trends across its product lines. While iPhone sales rose 6% to $46.22 billion, marking a year-over-year high, Mac and iPad sales showed more modest growth. Mac revenue increased by 2% to $7.7 billion, supported by the release of M4-powered models. iPad sales saw an 8% increase to $7 billion, a testament to its market-leading position in tablets. Services emerged as the standout performer, reaching a record $25 billion in revenue, up 12%, driven by growth in paid subscriptions.
However, not all segments shone equally. Wearables revenue dipped 3% to $9 billion, though the Apple Watch set an all-time high in user base expansion, with over half of users new to the product. As Apple continues to innovate across its product line, analysts await the December launch of additional Apple Intelligence features, which could drive renewed interest and stabilize revenue growth.
Intel's Restructuring Efforts and Competitive Hurdles
Meanwhile, Intel (INTC) reported a challenging third quarter with substantial restructuring costs, leading to a non-GAAP EPS loss of $0.46, well below expectations. The chipmaker is tackling headwinds in the competitive semiconductor market, intensified by rivals like AMD and NVIDIA. However, Intel’s Q4 guidance, projecting revenue between $13.3 billion and $14.3 billion, shows some cautious optimism. CEO Pat Gelsinger’s restructuring plan aims to boost efficiency, though the turnaround is fraught with risks, as analysts remain cautious about Intel’s ability to regain its competitive edge.
Intel’s core Client Computing Group (CCG), the backbone of its revenue, recorded a 7% decline to $7.3 billion. High inventory levels and a cooling PC market are pressuring the segment. In contrast, the Data Center and AI (DCAI) division saw a 9% revenue rise to $3.3 billion, though still overshadowed by AMD’s triple-digit growth in the sector. Foundry revenue, a vital component of Intel’s long-term strategy, slipped by 8% as operating losses ballooned due to impairment charges, pointing to ongoing challenges in restoring profitability.
Outlook: Opportunities and Challenges Ahead for Apple and Intel
For Apple, the success of its AI-driven iPhone 16 series remains pivotal as it expands generative AI capabilities to a global audience. If these features successfully attract a wider user base, Apple’s December quarter could see a stronger-than-expected close, offering some respite from competitive pressures in markets like China.
Intel, on the other hand, faces a longer path to recovery. While the 18A node technology and restructuring measures may help strengthen its foothold, the outcome hinges on effective execution and sustained interest from key players like Amazon Web Services (AMZN). The stakes are high as Intel’s strategic transformation unfolds, particularly with industry demand expected to waver heading into 2025.
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