Apple’s latest fiscal third-quarter results have revealed a significant turnaround for the tech giant, as it prepares to enter the artificial intelligence (AI) market with its upcoming iPhone release. Typically, this period is slow for Apple as customers await the next iPhone iteration, but the company managed to increase its sales by 5% year-over-year, surpassing analysts’ expectations. With revenue reaching $85.78 billion and a profit of $21.45 billion, Apple’s shares experienced mixed reactions from investors during extended trading.
Although iPhone sales continued to decline, dropping 1% from the previous year to $39.3 billion, the decrease was less severe than the 10% dip witnessed in the previous quarter. Apple’s AI-focused strategy is expected to reverse this trend, as the company plans to introduce new features that will enhance its virtual assistant, Siri. These features will include smarter capabilities, text drafting assistance, and even the creation of personalized emojis. However, most of these features will only be available on iPhones equipped with a special AI chip, which has so far been limited to premium models released last year. The upcoming iPhone 16 is expected to include this chip, prompting analysts to predict a surge in consumer demand as users upgrade their older devices to access the new AI features.
Apple’s foray into AI is also expected to benefit its services division, which experienced a 14% revenue increase to $24.21 billion in the latest quarter. However, the division faces regulatory challenges, including a high-profile lawsuit filed by the U.S. Justice Department against Google. The lawsuit targets a lucrative deal that generates approximately $20 billion in revenue by making Google the default search engine on Apple devices. Additionally, Apple is facing a separate lawsuit alleging anti-competitive practices surrounding the iPhone. The company has denied any wrongdoing and is seeking to have the case dismissed.
While Apple’s sales in China continue to decline, dropping 7% from the previous year, the region remains a crucial market for the company. The decline in revenue from China raises concerns among investors.