On Thursday, Apple executives projected a favorable outlook for sales growth, indicating the company’s potential recovery from a decline in iPhone sales, particularly with the introduction of new artificial intelligence features.
This forecast emerges in the wake of Apple’s slight decrease in iPhone revenue during the holiday shopping quarter, which fell short of Wall Street expectations. The setback was partly attributed to the limited availability of AI features in various markets—features that are expected to be significant selling points for the latest devices.
Apple’s CEO, Tim Cook, announced that these AI features will be more accessible to users in Europe by this spring. Following the announcement, Apple’s stock saw a 3.14 percent increase in after-hours trading.
Unlike many competitors, Apple has adopted a cautious approach to AI, opting against the extensive data center investments made by rivals like Microsoft. Instead, the company envisions AI as enhancing its hardware offerings.
This strategy received a boost earlier this week when China’s DeepSeek introduced free AI technology, which raised concerns about potential price wars that negatively impacted stocks of Apple’s competitors, while providing a slight lift to Apple’s shares.
Despite some challenges in rolling out AI features, Apple reported stronger-than-expected sales and profits in the fiscal first quarter for its iPad and Mac divisions, thanks to new chips that encouraged customer upgrades.
Chief Financial Officer Kevan Parekh provided an optimistic forecast for the current fiscal second quarter, estimating sales growth in the low to mid-single digits, after factoring in a negative impact of 2.5 percentage points due to a robust dollar.
Gil Luria, managing director at D.A. Davidson, noted that the management’s guidance exceeded market expectations, particularly as iPhone sales regain momentum following a difficult quarter in China.
In the recently concluded quarter, iPhone sales dipped slightly to $69.14 billion (approximately Rs. 5,99,024 crore), missing the average analyst estimate of $71.03 billion (around Rs. 6,15,229 crore), as reported by LSEG data. Sales in Greater China fell to $18.51 billion (about Rs. 1,60,367 crore), down from $20.82 billion (approximately Rs. 1,80,381 crore) from the previous year and below the $21.33 billion (nearly Rs. 1,84,793 crore) forecasted by a Visible Alpha survey of five analysts.
Overall sales for the fiscal first quarter, which ended on December 28, reached $124.30 billion (around Rs. 10,76,978 crore), slightly surpassing Wall Street’s target of $124.12 billion (roughly Rs. 10,75,320 crore). Earnings per share were reported at $2.40, exceeding the consensus estimate of $2.35 (approximately Rs. 203).
Apple has framed its AI initiatives as a suite of new capabilities, allowing users to draft emails and transcribe phone calls. However, the rollout has been staggered, and the company has yet to partner with a local entity in China to launch these features.
In a recent interview, Cook highlighted that the AI features, branded as Apple Intelligence, are generating increased sales of the new device line. “We observed stronger year-over-year performance for the iPhone 16 family in markets where Apple Intelligence was available compared to those where it wasn’t,” Cook stated.
While Cook confirmed that Apple Intelligence will be offered in additional languages, including French and German by April, he did not specify a timeline for its availability in China. “We are actively collaborating with regulators and will launch it as soon as we can,” he added.
Cook also mentioned that about half of Apple’s 11 percent decline in revenue from China could be linked to fluctuations in inventory levels held by resellers.
Sales of Mac computers surged due to the introduction of new Mac Minis, iMacs, and MacBook Pros equipped with the latest M4 chip. The AI features are more prevalent on Macs and iPads, where the larger hardware allows for more powerful processing capabilities.
“The silicon is ideal for handling AI workloads, and I believe this is a critical reason encouraging customers to upgrade,” Cook explained.
Sales figures for Mac and iPad reached $8.99 billion (approximately Rs. 77,891 crore) and $8.09 billion (around Rs. 70,094 crore) respectively, surpassing estimates of $7.96 billion (roughly Rs. 68,965 crore) and $7.32 billion (approximately Rs. 63,414 crore), as reported by LSEG data.
Furthermore, Apple’s services sector, encompassing offerings like iCloud storage and streaming services, achieved $26.34 billion (around Rs. 2,28,190 crore) in sales, reflecting a 13.9 percent increase from the previous year and exceeding the estimation of $26.09 billion (approximately Rs. 2,25,985 crore), per LSEG data.
Though Apple’s prudent approach to AI deployment has drawn some criticism, analysts, including Emarketer’s Jacob Bourne, noted that robust growth in services and ecosystem expansion is providing essential support to buffer the company’s ongoing challenges with iPhone sales in China.
The wearables division, comprising products like the Apple Watch and AirPods, reported $11.75 billion (about Rs. 1,01,794 crore) in sales, slightly below analyst expectations of $12.01 billion (approximately Rs. 104 crore), as indicated by LSEG data.
© Thomson Reuters 2025
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