Apple reports a slight decline in iPhone revenue during the crucial holiday quarter, signaling a challenging beginning for its AI integration efforts. The company's overall growth remains modest, raising questions about the impact of AI on its future performance.
Apple reported a slight dip in iPhone sales during the holiday quarter, indicating a cautious start to the company's endeavor to catch up with other tech giants in the artificial intelligence race. The iPhone's revenue declined by about 1 percent compared to the previous year's October-December period.
This decline wasn't entirely unexpected, considering the initial software update enabling the device's AI capabilities was released just before Halloween, and the technology remains unavailable in numerous markets outside the United States.Among the countries still awaiting Apple's AI suite is China, a crucial market where the company has been experiencing continuous losses. Although Apple CEO Tim Cook didn't specifically mention China during a conference call with investors, he disclosed that a software update expanding AI features to more European markets, along with Japan and Korea, will be rolled out in April.However, Apple's overall business performance in the last quarter also showed only a modest revenue increase, though the results surpassed analyst expectations. The Cupertino, California-based company generated $36.3 billion, or $2.40 per share, representing a 7 percent increase from the previous year. Revenue edged up by 4 percent year-over-year to $124.3 billion. This included $69.1 billion in iPhone revenue. In China, Apple's total revenue amounted to $18.5 billion, a 11 percent decrease compared to the previous year. This decline in China can be partly attributed to the shrinking market share of the iPhone in the country, where domestic companies have made significant progress.Apple's year-over-year iPhone shipments in China declined by nearly 10 percent in the most recent quarter, while homegrown companies Huawei and Xiaomi achieved year-over-year increases of more than 20 percent, according to International Data Corp. research. 'While China presents a potential risk, we believe the appeal of Apple products as luxury goods and the potential of AI innovations will sustain demand in the country,' wrote Edward Jones analyst Logan Purk in a research note analyzing the company's quarterly report.The holiday season results highlighted that integrating AI into the iPhone and Apple's other products might not significantly boost the company's recent lackluster growth as investors initially anticipated after Cook unveiled the technology to a captivated audience last June. The expectation that an AI-powered iPhone would encourage a massive wave of consumers to abandon their existing devices and splurge on upgrades is the primary reason Apple's stock price surged by 30 percent last year. However, the growing realization that a surge in demand might take longer than expected has caused Apple's shares to retract by 5 percent during the first month of the new year. The stock initially dipped slightly in extended trading after the figures were released, but later reversed course and rose by more than 3 percent after Cook stated that Apple is observing a record number of people upgrading their iPhones. Concerns surrounding Apple's weakening iPhone sales coincide with broader anxieties about whether AI will prove as profitable for US tech companies as previously envisioned. This uncertainty follows the release of a cost-effective version of AI technology by Chinese startup DeepSeek, which was developed at a significantly lower cost than previously thought possible.Unlike tech peers such as Microsoft, Google's parent company Alphabet Inc., and Meta Platforms, Facebook's parent company, Apple hasn't invested as heavily in AI, one of the reasons it has been perceived as an industry laggard. However, this cautious approach could work to its advantage if DeepSeek's early breakthroughs in reducing AI costs gain momentum. Apple's services division remained the company's most profitable segment outside of the iPhone, generating $26.3 billion in revenue during the last quarter, a 14 percent increase from the previous year.Although the services division has been flourishing for years, it generates more than $20 billion annually by securing Google as the default search engine on the iPhone and other products. However, this agreement is now threatened with a potential ban as part of the proposed penalties for Google's search engine being deemed an illegal monopoly.
APPLE IPHONE AI SALES CHINA TECH SERVICES DEEPSEEK COMPETITION
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