Apple sales rise 5%

Apple announced its third quarter earnings after the bell on Thursday, beating analysts' expectations on the top and bottom lines despite a year-over-year decline in iPhone sales.
Wall Street was closely watching Apple's performance in China, one of its most important markets, as the company has fought to regain market share from homegrown rivals including Huawei, but fell short of expectations in the region.

On Thursday, Apple announced its fiscal third-quarter earnings, surpassing Wall Street forecasts with a 5% increase in overall revenue. Despite this positive performance, Apple’s shares remained steady in after-hours trading.

Here’s a comparison of Apple’s results with LSEG consensus estimates for the quarter ending June 29:

• EPS: $1.40 vs. $1.35 estimated
  
• Revenue: $85.78 billion vs. $84.53 billion estimated
  
• iPhone revenue: $39.30 billion vs. $38.81 billion estimated
  
• Mac revenue: $7.01 billion vs. $7.02 billion estimated
  
• iPad revenue: $7.16 billion vs. $6.61 billion estimated
  
• Wearables, Home, and Accessories revenue: $8.10 billion vs. $7.79 billion estimated
  
• Services revenue: $24.21 billion vs. $24.01 billion estimated
  
• Gross margin: 46.3% vs. 46.1% estimated
  

For the quarter Apple saw earnings per share (EPS) of $1.40 on revenue of $85.5 billion. Analysts were anticipating EPS of $1.35 and revenue of $84.4 billion, according to estimates compiled by Bloomberg. Apple saw EPS of $1.26 and revenue of $81.7 billion in the same period last year.

Shares of Apple are up some 18.6% year to date despite a difficult start to the year, thanks, in part, to the impact of the company’s Worldwide Developer Conference in May, where it showed off its Apple Intelligence software.

Apple is spending more on AI

Apple's upcoming artificial intelligence system, Apple Intelligence, has the potential to drive a new wave of iPhone upgrades and boost hardware sales. However, during the analyst call's Q&A session, CEO Tim Cook and CFO Luca Maestri were evasive about the timeline for the rollout, the current impact on sales, and details regarding Apple's collaboration with OpenAI to incorporate ChatGPT into its software.

One area Cook did partially address was the company's investment in AI servers. This topic has been a focal point during the tech earnings season, as investors seek to understand the progress and future plans for AI infrastructure across the industry.

This week, Apple disclosed in a technical paper that it utilized more affordable Google TPUs, rather than Nvidia chips, in limited quantities to train its Apple Intelligence models. On Monday, Apple launched the initial version of Apple Intelligence, a suite of AI features aimed at enhancing Siri, auto-generating emails and images, and organizing notifications. At present, this release is only accessible to developers for testing.

As Apple continues to expand its infrastructure, it benefits from having developed its own chips for both phones and servers, allowing the company to avoid the substantial costs associated with third-party processors.

Sales of iPhone

Its sales totalled US$85.78-billion in the three months ended June 29, beating the average analyst estimate of US$84.53-billion, according to LSEG data. Its revenue had declined in the first three months of the year.

Sales of iPhones fell 0.9 per cent to US$39.3-billion, a smaller decline than the 2.2-per-cent drop analysts expected, as demand picked up ahead of the launch of artificial-intelligence features.
China, Apple's third-largest market, continued to be a challenge as sales fell by 6.5%. Although this represented an improvement from the 8.1% decline reported in the previous quarter, it was still larger than the anticipated drop of 2.4%, according to Visible Alpha.

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