Apple’s revenue increased 5 per cent in the three months to the end of June, as earnings from its services business and a surge in iPad purchases offset a decline in iPhone sales and a continued slowdown in China.
Total net sales rose to $85.8 billion from $81.8 billion in the second quarter of 2023, beating analysts’ expectations for $84.5 billion.
Net income rose 8 per cent to $21.4 billion from $19.9 billion, while earnings per share were up 11 per cent year on year to $1.40 versus the consensus estimate for $1.35.
Shares flipped between small gains and losses in after-hours trading on Thursday. Apple has risen 18 per cent this year and is the most valuable company in the world with a market capitalisation of $3.3 trillion.
Blemishing the quarter, revenue for the closely watched greater China region declined again, falling 7 per cent to $14.7 billion from $15.8 billion a year earlier, as Apple continues to face competitive pressure from local handset makers and a ban from governmental use.
While acknowledging the challenges faced in the country amid US-China geopolitical tensions, chief financial officer Luca Maestri said that on a constant currency basis the fall in sales was only 3 per cent and the rate of decline was slowing.
More encouraging was Apple’s services business – which includes the App Store, Apple Pay and the TV+ streaming platform – which continued to accelerate, rising to $24.2 billion from $21 billion a year ago.
Revenue from its flagship iPhone was $39.3 billion, down slightly from $39.7 billion a year ago. This was offset by a 24 per cent jump in iPad sales to $7.2 billion, driven by the release in May of a series of new models with more powerful chips and larger screens.
Apple is bullish at the prospect of many customers upgrading to the newest iPhone models to gain access to new artificial intelligence features. With the iPhone 16 expected to launch in September, investors are watching closely for signs of how quickly the anticipated AI boost will start to show.
Apple announced the new features, known as “Apple intelligence”, at its developer conference in June.
A beta version of the AI-enhanced iPhone operating system, iOS 18.1, became available to developers this week.
A deal with OpenAI will also give Apple users free access to ChatGPT, and Apple has explored partnerships with other big model providers such as Google.
Research and development expenses rose 8 per cent to $8bn in the quarter. Mr Maestri declined to comment on how much of this was spent on AI, including the infrastructure needed to train and run its own large language models.
Apple plans to run those models on-device and in its own data centres, which it says will better protect users’ privacy and data.
“We have significantly increased our level of effort on AI over the course of the year,” Mr Maestri said. “We redeployed engineering resources from other programmes to AI because we recognised the need and importance of this new tech.”
Last month Apple’s new mixed reality headset, the Vision Pro, launched for consumers in Europe, China, Hong Kong, Singapore, Japan and Australia.
Apple announced a dividend of 25 cents a share worth $3.7 billion for the quarter, with total shareholder returns rising to $32 billion when buybacks were included. – Copyright The Financial Times Limited 2024
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