Apple has bounced back from a recent slump in iPhone sales during its summer quarter, indicating that the company’s new strategies, including the integration of artificial intelligence, are starting to bear fruit.
For the July to September period, iPhone sales reached $46.22 billion, marking a 6% increase compared to the same quarter last year. This uptick ended a trend of two consecutive quarterly declines in iPhone sales.
This surge in iPhone revenue contributed to Apple surpassing analyst expectations for total quarterly revenue and profit, even after accounting for a one-time charge of $10.2 billion due to a recent EU court ruling related to back taxes.
Apple reported earnings of $14.74 billion, or 97 cents per share, which is a 36% drop from the previous year. However, excluding the tax charge, the company would have earned $1.64 per share, slightly above the $1.60 per share forecast by analysts, according to FactSet Research. Overall, revenue grew by 6% from last year, reaching $94.93 billion, exceeding analyst predictions by about $400 million.
Investors seemed to have expected stronger results and were left underwhelmed by Apple’s forecast for the October-December quarter, which suggested that revenue growth during the holiday shopping season may not meet analysts’ optimistic projections. As a result, Apple’s stock dropped about 2% in after-hours trading, bringing it down to around $221, significantly lower than its mid-October peak of about $237.
The latest quarterly results included the initial days of sales for the new iPhone 16 lineup, which features four models designed to showcase various AI capabilities branded as “Apple Intelligence.” This branding aims to set Apple apart from competitors like Samsung and Google, who have already integrated AI technology into their smartphones.
Although the iPhone 16 was designed with AI in mind, the technology was only activated earlier this week through a free software update. This update introduced several new features, including enhancements to Siri, making the virtual assistant smarter, more versatile, and more engaging. Currently, these improvements are available only in the U.S.
“This is just the beginning of what we believe generative AI can achieve,” Apple CEO Tim Cook stated during a conference call with analysts on Thursday.
Cook shared plans to extend the AI features of the iPhone to other countries in December, along with additional software updates that will enhance both the iPhone 16 and the high-end iPhone 15 models, which have the necessary advanced chips for these new capabilities. The December rollout will also introduce an option to connect with OpenAI’s ChatGPT, allowing users to access technology that Apple is not developing independently, as well as support for more languages.
Investors are optimistic that the wider availability of Apple’s AI features will encourage the hundreds of millions of consumers using older iPhones to upgrade to the latest models.
“We believe this provides a strong incentive to upgrade,” Cook stated. However, analyst Thomas Monteiro from Investing.com thinks that if consumers were truly impressed by Apple’s AI technology, iPhone sales would be growing more rapidly. He believes this puts added pressure on Apple to enhance its efforts to wow the public.