Apple sees its first quarterly revenue increase in one year
Apple has had enough challenges to start the year. The Apple Watch has been transformed by patent lawsuits, the App Store has come under fire from developers and the iPhone has faced renewed competition in China.
To top it all off, the company was recently dethroned as the undisputed king of the stock market when Microsoft replaced it as the world's most valuable publicly traded company.
But on Thursday, the tech giant showed the versatility and strength of its business, reporting that revenue rose 2 percent to $119.58 billion in the three months ended December. It was Apple's first quarterly revenue increase in a year and helped the company achieve $33.92 billion in profits during the period, up 13 percent. from a year earlier.
The results showed that Apple had the ability to overcome a slowdown in device sales by getting its massive customer base to buy more apps and services, such as Apple Music. The company said software and services sales rose 11 percent to $23.12 billion during the period.
Apple shares fell by about 1 percent in after-hours trading, even as the company beat analyst expectations with $117.99 billion in revenue.
Although its signature products, the iPhone and iPad, are more than a decade old, Apple said the number of devices used around the world last year increased by 200 million, up from the two billion it reported a year ago . Investors are watching this figure closely because as the number of iPhones, iPads and Apple Watches increases, more and more people are willing to pay Apple for things like cloud storage.
The iPhone, which accounts for more than half of Apple's annual revenue, was the only Apple device to show a sales increase during the quarter. Apple's release of a new, titanium version of the device last year helped boost the number of smartphones sold by five million, according to Canalys, a market research firm. The rebound saw iPhone sales rise 6 percent to $69.7 billion.
But sales of iPads and wearables like Apple Watches fell, and Mac sales were flat, hurting the company's overall device sales, which at $96.46 billion were nearly the same as a year earlier.
Apple spent the days before Christmas warning customers that it would have to suspend sales of its Apple Watch after losing a patent case over the device's pulse oximetry feature. To continue sales, it overhauled the software of its new watches and removed the feature.
In China, Apple's second-largest market, the company is dealing with a slowing economy and increasing competition. Chinese consumers are cutting back on their spending, while Huawei, the Chinese mobile phone giant, has released a smartphone with high-quality cameras and lower prices than Apple. To keep up, Apple has started discounting iPhones in China.
Apple's growth lagged behind the gains of other tech giants. On Tuesday, Microsoft said quarterly revenue rose 18 percent to $62 billion, while Alphabet, Google's parent company, reported a 13 percent increase in revenue.
The value of these companies has soared as they have embraced generative artificial intelligence, something that Apple has been slower to adopt. Tim Cook, the company's CEO, said last year that work was underway on AI, but he declined to elaborate.
Apple has instead focused on releasing an augmented reality headset, the Vision Pro. The company put the device, which costs $3,500, on sale in mid-January and sold out of the first batch of about 200,000 headsets, according to analyst estimates. Shipping of the device will begin on Friday.