Apple is expected to report its biggest quarterly revenue jump in two years on Thursday, with iPhone demand improving from recent years towards the end of the company’s annual product cycle, particularly in China.
The results will give investors the first hint of demand for the latest iPhone 16 series, which was released just days before the end of the company’s fourth fiscal quarter.
But the focus will be on management’s first fiscal quarter commentary amid concerns that the slow rollout of Apple Intelligence features could dampen the long-awaited AI-driven “supercycle” for Apple’s biggest seller.
The company is trying to catch up in the AI space as Android smartphone rivals like Samsung Electronics and software rivals like Microsoft aggressively roll out programs aimed at tapping into the generative AI boom.
“The strength of the iPhone 16 cycle is the most important question for both the December quarter and FY25,” said Bernstein analyst Tony Sacconaghi.
“Investors should expect Apple to be bullish on iPhone 16 and Apple Intelligence, but that may or may not necessarily reflect the end-cycle success.”
On Monday, the company began a limited rollout of the feature to US customers in English, just 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 a resurgent Huawei, as well as other domestic players such as Vivo, Xiaomi and Honor.
This has raised concerns that customers could shift device purchases from the all-important holiday season to next year, delaying potential sales growth from AI.
Apple is expected to report a 3.8 percent increase in iPhone sales in the September quarter, according to analyst estimates compiled by LSEG. This will lead to a drop of two quarters.
The company’s total revenue is expected to grow 5.7 percent in the July-September quarter, the fourth fiscal quarter, LSEG data showed.
Greater China revenue is expected to grow 6.6 percent. According to local reports, some iPhone models, including the iPhone 16 Plus version, were discounted by 10 percent on online retail platform Pinduoduo ahead of the model’s official release.
That, along with the iPhone 16 series, helped Apple gain the second-largest share of the Chinese market in the three months to September, according to IDC.
iPad sales are expected to rise 10.1 percent to $7.09 billion after a 23.7 percent jump in the previous three months thanks to the launch of more powerful versions of the tablet.
In the services sector, which includes the App Store and usually outpaces Apple’s device sales growth, sales are expected to grow 13.3 percent, slightly slower than the previous quarter.
The business faces mounting obstacles after European Union antitrust authorities accused Apple of violating the bloc’s technology rules in June.
Apple’s lucrative deal with Alphabet, which makes Google the default search engine on iOS, is also under scrutiny in the US.
The fourth-quarter results will also include a one-time income tax charge of about $10 billion after Europe’s Supreme Court ruled against Apple in a lawsuit over its Irish tax affairs in September.
© Thomson Reuters 2024