Apple’s revenue surged by 5% in the three months leading up to the end of June, thanks to a robust performance from its services sector and a spike in iPad sales, which helped counterbalance a dip in iPhone sales and a persistent downturn in China. The tech giant’s total net sales climbed to $85.8 billion from $81.8 billion in the same period in 2023, surpassing analysts’ predictions of $84.5 billion. Net income also saw an 8% increase, reaching $21.4 billion from $19.9 billion, while earnings per share rose by 11% year-on-year to $1.40, beating the consensus estimate of $1.35. Despite these positive results, Apple’s shares wavered between minor gains and losses during after-hours trading on Thursday.
Apple, which has seen its stock rise 18% this year, maintains its position as the world’s most valuable company with a market capitalization of $3.3 trillion. However, the quarter wasn’t without its challenges. Revenue from the crucial Greater China region fell by 7% to $14.7 billion from $15.8 billion a year earlier, amid increasing competition from local smartphone manufacturers and a government ban on its use. CFO Luca Maestri acknowledged the hurdles presented by the ongoing US-China geopolitical tensions but noted that, on a constant currency basis, the sales decline was only 3% and showed signs of slowing.
On a brighter note, Apple’s services division, encompassing the App Store, Apple Pay, and the TV+ streaming service, continued its upward trajectory, generating $24.2 billion compared to $21 billion the previous year. Meanwhile, iPhone revenue slightly dipped to $39.3 billion from $39.7 billion, offset by a remarkable 24% increase in iPad sales, which hit $7.2 billion. This surge was driven by the May release of new models featuring more powerful chips and larger screens.
Citigroup analyst Atif Malik highlighted the focus on underlying demand across various product categories, particularly iPhones, given the concerns around the overall smartphone market and competition in China. Apple remains optimistic about the potential for many customers to upgrade to the latest iPhone models, which will feature new artificial intelligence capabilities. With the iPhone 16 set to launch in September, investors are keenly watching for early signs of the anticipated AI-driven boost. The new features, branded as “Apple Intelligence,” were unveiled at Apple’s developer conference in June, and a beta version of the AI-enhanced iPhone operating system, iOS 18.1, was recently made available to developers. A partnership with OpenAI will also grant Apple users free access to ChatGPT, and the company is exploring further collaborations with major AI providers like Google.
Maestri emphasized the relevance of the upcoming Apple Intelligence features, stating they will offer compelling reasons for users to upgrade. Research and development expenses rose by 8% to $8 billion for the quarter, with significant investments directed towards AI infrastructure. Although Maestri did not specify the exact allocation for AI, he confirmed a substantial increase in AI efforts, reallocating engineering resources from other projects to focus on this critical technology.
In July, Apple launched its new mixed reality headset, the Vision Pro, for consumers in Europe, China, Hong Kong, Singapore, Japan, and Australia. Additionally, Apple announced a quarterly dividend of 25 cents per share, amounting to $3.7 billion, with total shareholder returns reaching $32 billion when including buybacks.
