What you need to know:
- On the regulatory front, Apple faces scrutiny in the European Union and the U.
- Apple maintained its dividend at 25 cents per share and announced a $110 billion stock buyback in the fiscal second quarter.
Apple (AAPL.O) reported better-than-expected third-quarter iPhone sales and anticipates further gains, despite disappointing results in its China market. Shares of Apple rose nearly 1% in after-hours trading, outperforming other tech stocks. The company is poised to introduce a major software upgrade for the iPhone this fall, incorporating new artificial intelligence features.
Apple projected revenue growth for its fiscal fourth quarter similar to the 4.9% increase in the previous quarter, which exceeded analysts’ expectations. iPhone sales declined slightly by 0.9%, a smaller drop than the 2.2% forecasted by analysts. Chief Financial Officer Luca Maestri highlighted the strong performance of the iPhone 15 series compared to its predecessor, the iPhone 14.
However, Apple faced challenges in China, its third-largest market, with sales down 6.5%. While this was an improvement from the 8.1% decline in the prior quarter, it was worse than the expected 2.4% drop. Excluding foreign exchange effects, the decline was under 3%, and Maestri expressed cautious optimism about the company’s performance in China.
To compete with cheaper local alternatives, Apple has been offering discounts on iPhones in China. The company’s AI initiatives, including the anticipated iPhone 16 series and Apple Intelligence features, are expected to drive upgrades. Although some consumers may have already purchased high-end iPhone 15 models to access upcoming AI features, CEO Tim Cook noted it’s too early to determine if this is a significant factor.
Analysts emphasize that Apple’s success will depend on managing AI development costs and creating compelling AI features that encourage consumers to upgrade. Apple has invested over $100 billion in R&D over the past five years. The company maintains strong gross margins despite the high costs associated with AI.
On the regulatory front, Apple faces scrutiny in the European Union and the U.S. regarding its App Store practices and alleged monopolistic behavior. Despite these challenges, Apple’s quarterly earnings per share were $1.40, surpassing Wall Street estimates of $1.35. The company’s services segment saw a 14.1% revenue increase to $24.21 billion, while Mac sales grew 2.5% to $7.01 billion, and iPad sales surged 23.7% to $7.16 billion. Wearables sales fell 2.3% to $8.10 billion. Apple maintained its dividend at 25 cents per share and announced a $110 billion stock buyback in the fiscal second quarter.
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