Apple Inc. (AAPL) rose 3.5% in early U.S. trading on Friday after issuing a revenue forecast that exceeded Wall Street expectations. As of this writing, it is up 1.4%.
The company projected fiscal second-quarter revenue growth in the low- to mid-single digits, signaling sustained demand for the iPhone despite a slight year-over-year decline in sales. This guidance, stronger than analysts had anticipated, reassured investors following a mixed earnings report.
For the quarter ending December 28, Apple reported earnings per share of $2.42 on revenue of $124.3 billion, both slightly exceeding analyst projections. However, iPhone revenue fell to $69.14 billion, missing the estimated $71.03 billion and marking a modest decline from the previous year’s $69.70 billion. Despite this, Apple noted that its active installed iPhone base reached an all-time high, and upgrade rates also set new records.
Services and Mac Segments Drive Growth
While iPhone sales underperformed, Apple’s services division remained a bright spot, generating $26.34 billion in revenue—an impressive 14% year-over-year increase that outpaced expectations. The segment, which includes the App Store, Apple Pay, and subscription services, now boasts over one billion paid subscriptions globally.
Mac sales also performed well, rising 15.5% year-over-year to $8.99 billion, driven by strong demand across all regions. The company attributed this surge to its latest MacBook Air, MacBook Pro, and Mac mini models, powered by its proprietary M-series chips. Similarly, iPad revenue increased 15.2% to $8.09 billion, reflecting heightened interest in the latest iPad mini and iPad Air models.
Challenges in China and AI Strategy Under Scrutiny
Apple’s performance in Greater China presented a notable weak spot, with revenue declining 11% year-over-year to $18.5 billion—well below analyst expectations of $21.57 billion. CEO Tim Cook attributed part of this decline to inventory adjustments, but competition from local smartphone brands and the delayed rollout of Apple Intelligence (AI) features in China also contributed.
Unlike its Silicon Valley peers, Apple has adopted a more cautious approach to AI, avoiding heavy investments in data centers. While its new AI-powered features, branded as Apple Intelligence, are positively influencing sales in markets where they have launched, their limited availability has restrained global adoption. Apple plans to expand AI features to more regions and languages in the coming months, which could drive renewed interest in its latest devices.
Despite the China setback, Apple’s overall financial health remains strong, with diversified revenue streams and a promising outlook. Investors appear to have priced in the temporary weakness in China, focusing instead on the company’s solid guidance and robust performance in other segments. As Apple refines its AI strategy and prepares for a broader iPhone refresh later this year, market watchers will be closely monitoring its ability to sustain growth and innovation in an increasingly competitive landscape.
Apple’s performance in Greater China presented a notable weak spot, with revenue declining 11% year-over-year to $18.5 billion—well below analyst expectations of $21.57 billion. CEO Tim Cook attributed part of this decline to inventory adjustments, but competition from local smartphone brands and the delayed rollout of Apple Intelligence (AI) features in China also contributed.
Unlike its Silicon Valley peers, Apple has adopted a more cautious approach to AI, avoiding heavy investments in data centers. While its new AI-powered features, branded as Apple Intelligence, are positively influencing sales in markets where they have launched, their limited availability has restrained global adoption. Apple plans to expand AI features to more regions and languages in the coming months, which could drive renewed interest in its latest devices.
Despite the China setback, Apple’s overall financial health remains strong, with diversified revenue streams and a promising outlook. Investors appear to have priced in the temporary weakness in China, focusing instead on the company’s solid guidance and robust performance in other segments. As Apple refines its AI strategy and prepares for a broader iPhone refresh later this year, market watchers will be closely monitoring its ability to sustain growth and innovation in an increasingly competitive landscape.
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