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Apple gave cautious guidance for the crucial holiday quarter on a call with investors, as uncertainty over how a rollout of new AI features will translate into sales of iPhones and other devices complicated otherwise solid quarterly results.
The outlook for revenue growth in the low to mid-single-digits in the current quarter fell just short of the high end of Wall Street’s expectations. Shares dropped 1.9 per cent on Thursday in after-hours trading.
Consensus estimates ahead of the call predicted about $128bn in revenue for the current quarter, which would represent an increase of roughly 7 per cent year on year, at the high end of the limited guidance Apple offered on Thursday. The company does not provide exact guidance figures.
The report from the world’s most valuable listed company comes during a mixed week for Big Tech companies’ earnings, with Google and Amazon beating expectations but Microsoft and Meta underwhelming, dragging down US stocks across the board on Thursday.
While Apple reported solid revenue growth in its hardware and services business, sales in the China region were flat from a year ago.
Analysts were also watching for the first glimpses of how sales of the iPhone 16 — which is equipped for its “Apple Intelligence” features — were going.
Revenue was up 6 per cent from a year ago to $94.9bn for the quarter to September 28, slightly above consensus estimates of $94.4bn.
Diluted earnings per share were $0.97, after the company took a one-time $10.2bn charge in connection with an EU tax ruling earlier this year. Net income was $14.7bn, compared to the $24.3bn estimated by analysts absent the charge.
Overall iPhone sales were $46.2bn, compared with $43.8bn the year before. China sales were flat year on year at about $15bn, an improvement from the declines seen in the previous two quarters of 2024.
On the call with investors, Apple chief executive Tim Cook credited improvements in foreign exchange rates, as well as solid smartphone sales and a growing base of users, for the improved performance in China.
The company’s services business, which includes the App Store and Apple Pay, hit $24.9bn, up about 12 per cent year on year.
On Monday Apple began the launch of its AI features with software updates for iPhone, iPad and Mac. The first Apple Intelligence tools, initially available only in US English and limited on smartphones to the iPhone 15 and 16, included a revamped Siri voice assistant, writing aids and AI-powered photo editing tools.
Apple chief financial officer Luca Maestri told the Financial Times that sales of the iPhone 16 — the latest model of its flagship smartphone, which shipped on September 20 — had been “higher than iPhone 15 sales” during its first eight days of sales in 2023.
Customers were proving receptive to new generative AI features, Maestri said, downloading the AI-focused operating system this week at twice the speed they were for last year’s software update.
More AI features, such as the integration of Siri with ChatGPT and AI-powered emoji and image generation, are expected to launch before the end of the year.
Analysts have questioned whether an AI-driven boost to sales will happen in time for the current quarter. Both Cook and Maestri declined to go into greater detail on the expected impact of Apple Intelligence on holiday sales so soon after their launch.
Maestri is stepping down as chief financial officer at the start of 2025, with Kevan Parekh, Apple’s vice-president for financial planning and analysis, taking over the role.
Cook also declined to comment on the upcoming US presidential election. Apple’s supply chains are heavily linked to Chinese manufacturers, and former president Donald Trump has vowed to levy new tariffs on imports if he wins a second term.
“I wouldn’t want to speculate about those sorts of things,” Cook said.
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