Written by Stephen Nelis
(Reuters) – Apple on Thursday reported gross sales and earnings that beat Wall Road expectations regardless of decrease iPhone gross sales, as sturdy efficiency of its flagship machine in China helped the corporate climate a world downturn within the smartphone market.
Apple mentioned gross sales for the third quarter of the fiscal yr ending July 1 fell 1.4% to $81.8 billion, and earnings per share rose 5% to $1.26. That beat analyst expectations at $81.69 billion and $1.19 per share, in response to IBES information from Refinitiv. iPhone gross sales barely missed analyst estimates, however had been offset by sturdy gross sales within the providers phase that accommodates Apple TV+ and gross sales in China that grew 8% year-over-year.
And Apple’s share costs stabilized in prolonged buying and selling after the outcomes.
Apple’s R&D spending additionally got here in at $22.61 billion for the fiscal yr to date, up almost $3.12 billion from this level a yr earlier.
Apple CEO Tim Cook dinner advised Reuters in an interview that the rise in analysis and improvement spending was pushed partially by work on generative synthetic intelligence, the identical space that drives spending at different huge tech corporations.
“We’ve got researched throughout a variety of AI applied sciences, together with generative AI, for years. We are going to proceed to responsibly make investments, innovate and develop our merchandise utilizing these applied sciences to assist enrich individuals’s lives,” Cook dinner mentioned. “We’re clearly investing quite a bit, and it exhibits within the R&D spending that you are looking at.”
Apple is in a fragile scenario, with its entrenched iPhone jockeying for share in opposition to Android rivals in a mature market, whereas its subsequent huge product — the Imaginative and prescient Professional combined actuality headset introduced in June — is not but in shoppers’ arms.
Whereas Huge Tech opponents together with Microsoft and Alphabet’s Google are spending billions on dueling chatbots and different AI applied sciences, Cook dinner mentioned AI will seem in Apple merchandise as new options. One such function, he mentioned, would be the iPhone’s capacity to transcribe voicemails in actual time, beginning within the fall.
In the meantime, Apple gave the impression to be outperforming what has been the weakest smartphone market in China in almost a decade. Total smartphone gross sales fell 8% in China within the calendar second quarter to their lowest ranges since 2014, in response to Counterpoint Analysis. Against this, Cook dinner advised Reuters that Apple’s iPhone gross sales in China grew “by double digits” and that gross sales had been additionally excessive in different sectors in China.
This helped Apple enhance gross sales within the Larger China area to $15.76 billion, from $14.60 billion in the identical quarter final yr.
“This was actually achieved by attracting a quarterly document of switches to the iPhone, in addition to having sturdy improve exercise,” Cook dinner mentioned. “We additionally set quarterly information in China for each wearables and residential, equipment, and providers.”
Apple mentioned iPhone gross sales had been $39.67 billion, wanting analyst expectations of $39.91 billion, in response to Refinitiv information. Cook dinner mentioned the bottom of put in iPhones had reached a brand new excessive however didn’t give any numbers.
“The corporate continues to face headwinds from declining development within the smartphone market,” mentioned Jeremy Goldman, an analyst with Insider Intelligence. “All eyes at the moment are on their earnings name for any potential Imaginative and prescient Professional or AI-related bulletins that would additional push the boundaries of their enterprise mannequin.”
Apple’s Providers phase, which incorporates the Apple TV+ service that introduced a deal to hold Main League Soccer, generated $21.21 billion in income, in comparison with analyst estimates of $20.76 billion, in response to Refinitiv information.
Cook dinner mentioned Apple now has 1 billion subscribers on its platform, which incorporates Apple providers and third-party apps, up from 975 million subscribers 1 / 4 in the past.
“Providers income was a shiny spot, reaching its highest quarterly gross sales quantity ever because of larger search license income,” mentioned Jesse Cohen, senior analyst at Investing.com.
The corporate’s wearables enterprise, which incorporates the Apple Watch and AirPods, generated $8.28 billion in income, in comparison with analyst estimates of $8.39 billion, in response to Refinitiv information.
Mac and iPad gross sales got here in at $6.84 billion and $5.79 billion, respectively, in comparison with analyst estimates of $6.62 billion and $6.41 billion, in response to Refinitiv information.
“Virtually half of Mac patrons through the quarter had been new to the product, and we proceed to see sturdy improve exercise for Apple Silicon,” Cook dinner advised Reuters.
(Reporting by Stephen Nelis in San Francisco and Yuvraj Malik in Bengaluru; Enhancing by Peter Henderson and Matthew Lewis)