Apple is on track for its biggest sales increase in two years due to demand for iPhones in China
Apple is expected to report its biggest quarterly revenue increase in two years on Thursday, with iPhone demand doing better than in recent years toward the end of the company’s annual release cycle, especially in China.
The results will give investors the first hints of demand for the latest iPhone 16 series, which was released a few days before the end of the company’s fiscal fourth quarter.
But the focus will be on executive commentary for the first fiscal quarter, amid fears that releasing Apple Intelligence features at a slow pace could trigger a long-awaited AI-led “supercycle” for Apple’s biggest vendor temper.
The company is playing catch-up in AI as Android smartphone rivals like Samsung Electronics and software rivals like Microsoft are aggressively rolling out applications aimed at tapping into the generative AI boom.
“The strength of the iPhone 16 cycle is the key question for both the December quarter and FY25,” said Bernstein analyst Toni Sacconaghi.
“Investors should expect Apple to be bullish on the iPhone 16 and Apple Intelligence, but this may or may not necessarily reflect the ultimate success of the cycle.”
The company began a limited rollout of the features to US customers in English on Monday, weeks after the iPhone 16 went on sale.
For now, Apple Intelligence will remain unavailable in key markets including Europe and China, where the tech giant is under pressure from the resurgent Huawei, as well as other domestic players such as Vivo, Xiaomi and Honor.
That has raised concerns that customers will shift device purchases from the all-important holidays to next year, delaying a potential AI-powered sales boost.
Apple is expected to report a 3.8 percent increase in iPhone sales in the September quarter, according to LSEG analyst estimates. That would mean a decline of two quarters.
Total revenue is expected to rise 5.7 percent in the July-September period, the fourth fiscal quarter, LSEG data shows.
Sales from Greater China are expected to increase by 6.6 percent. According to local reports, some iPhone models, including a version of the iPhone 16 Plus, received 10 percent discounts on online retail platform Pinduoduo ahead of the model’s official release.
That and the iPhone 16 series helped Apple gain the second-largest share of the Chinese market in the three months through September, IDC data shows.
iPad sales are expected to rise 10.1 percent to $7.09 billion, after rising 23.7 percent in the previous three months, driven by the launch of more powerful versions of the tablet.
The services sector – which includes the App Store and which typically outpaces Apple’s device growth – is expected to see a 13.3 percent increase in revenue, slightly slower than the previous quarter.
The company is facing mounting hurdles after European Union antitrust regulators accused Apple in June of violating the bloc’s tech rules.
Apple’s lucrative deal with Alphabet, which makes Google the default search engine in iOS, is also under scrutiny in the US.
The fourth-quarter results will also include a one-time income tax of about $10 billion, after the European Supreme Court ruled against Apple in September in the lawsuit over its tax affairs in Ireland.
© Thomson Reuters 2024
