Apple reported better-than-expected earnings in the third quarter of 2024, with buzz about its new AI features offsetting a continuing decline in its key China market.
Earnings exceeded analyst predictions despite a year-over-year decline in iPhone sales, with revenue rising 4.9% to $85.78bn in the three months ending 29 June, beating the average analyst estimate of $84.53bn. The company maintained its cash dividend at 25 cents for each share.
The strong report represented a bright spot in the tech space after difficult earnings reports from other tech giants like Amazon, Snap and Intel. The market saw a sell-off on Thursday amid disappointing results, including from Intel – which announced plans to cut more than 15,000 jobs as it tries to cut billions of dollars in costs to turn its business around. Amazon’s stock also dropped more than 4% on Thursday after the company reported lower-than-expected sales this quarter and forward-looking statements indicating a continued slowdown in the next.
Investors were keen to get updates on Apple sales in China, the company’s third-largest market, where its market share has been on the decline. Apple dropped out of the top five smartphone providers in the country for the first time earlier this year, overtaken by local brands like vivo, OPPO and Huawei. Third quarter earnings results showed China sales declined 6.5% to $14.73bn – more dramatically than the decline of 2.4% analysts had predicted.
In a call with investors, Tim Cook, the Apple CEO, addressed these concerns, attributing some of that lag to fluctuating exchange rates. On a constant currency basis, Cook said, the decline was less than 3% and iPad sales have returned to growth there.
“We continue to be confident in the long-term opportunity in China,” he said. “I don’t know how every chapter the book reads, but we’re very confident in the long term.”
Although China sales struggled, overall iPhone sales were better than expected – falling 0.9% to $39.30bn, a smaller decline than the 2.2% drop analysts expected. That improvement is due in part to rising demand in anticipation of Apple’s launch of its artificial intelligence features, which it announced at its annual developers conference WWDC in June.
The tech firm’s foray into artificial intelligence includes a range of generative AI tools integrated into the operating systems of its devices, including a partnership with OpenAI that integrates into its voice assistant Siri.
Those AI features will only be available iPhone 15 Pro models and later, but analysts say this report shows a strong start. Apple typically announces new devices in September, so analysts will be looking ahead to determine how the AI announcements affect future sales.
“It’s an incredibly solid quarter for Apple, which validates the company’s turnaround toward becoming the leading player in the AI-to-consumer space,” said Thomas Monteiro, senior analyst at Investing.com. “These numbers should look even better once the AI features hit the market in the quarters ahead.”
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The company also reported substantial growth in iPad sales. The segment increased 23.7% to $7.16bn, above analyst expectations of $6.61bn, after Apple launched a new AI-focused iPad Pro and a larger iPad Air in May to revive demand for a product line that had languished for the past two years.
In the company’s wearables segment, which represents sales of Apple Watches and AirPods headphones, sales fell 2.3% to $8.10bn, compared with analyst estimates of $7.79bn.
Reuters contributed reporting