Apple reported a 10% decline in iPhone sales for the second fiscal quarter, falling from $51.33 billion to $45.96 billion year-over-year. This slowdown was partially driven by an 8% drop in sales within China. Apple’s relatively slower adoption of AI compared to competitors like Google and Microsoft may have also contributed to consumers postponing the purchase of new iPhones. The company has hinted at significant announcements related to AI (likely at WWDC in June), while the iPhone 16 release is anticipated for fall.
Apple acknowledges the impact of pent-up demand fulfillment from the previous fiscal year, with CEO Tim Cook estimating a $5 billion impact on March quarter revenue last year. However, the company still outperformed Wall Street expectations, leading to a 6% increase in stock value after hours. This was driven by an increase in services revenue and a substantial $110 billion stock buyback, surpassing last year’s $90 billion purchase.
Apple’s services business, which encompasses offerings such as iCloud, Apple TV+, and Apple Music, experienced a notable 14% growth for the year. The company has anticipated a slowdown in hardware sales, and its increasing focus on subscription services has helped mitigate some of this loss. CFO Luca Maestri projects double-digit growth for the services business, akin to the first half of the fiscal year. He also anticipates similar growth for iPad sales. Apple is scheduled to launch two new iPads at an upcoming event, which could help drive growth in that segment.
The company’s chip progress, including the M4 chip addition to the Apple Silicon line, is likely to face increased competition from Microsoft’s efforts in the space, set to be unveiled at the Build conference in late May. More hardware announcements are anticipated at Apple’s annual World Wide Developers Conference in June.
Apple does not disclose specific Vision Pro sales figures, which are included in the broader Wearables, Home, and Accessories category. Reports generally indicate sales below expectations. However, the company remains optimistic about the headset’s reception, with Cook expressing excitement about its launch and emphasizing the potential of spatial computing.
In response to concerns about Apple’s position in the AI landscape, Cook acknowledged the importance of generative AI across the company’s products. He highlighted Apple’s unique advantages and hinted at future announcements. Reports suggest Apple’s plans to integrate both OpenAI’s ChatGPT and Google’s Gemini into future iPhones, but Cook remained cautious, stating that more details would be provided in the coming weeks.
