SAN FRANCISCO — After Apple unveiled artificial intelligence features for iPhones last year, the company’s stock soared in anticipation that the new abilities would provide a jolt to a stale business. But a boom in sales hasn’t materialized.
On Thursday, the tech giant said it sold $69.14 billion worth of iPhones in its most recent quarter, a 0.8% decrease from a year earlier and 3.5% below the quarterly sales record it reported in early 2022. The company’s sales of apps and services, such as Apple Music and Apple TV+, were up, helping to offset the modest performance of its iPhone business.
Apple’s quarterly revenue increased 4% to $124.3 billion during the three months that ended in December. Its profit rose 7% to $36.33 billion, rebounding from the previous quarter when it paid a multibillion-dollar fine to European regulators.
The results fell just short of Wall Street analysts’ expectations for $124.38 billion in sales but exceeded projections of $35.62 billion in profit. The company said it expected revenue to rise in the current quarter, which ends in March. Shares rose 3.5% in after-hours trading because of the company’s encouraging sales outlook.
Despite heavily promoting its new AI technology, Apple released an iPhone in September without its signature selling point: an AI system called Apple Intelligence. The AI features became available about a month later in the United States and eventually expanded to other English-speaking countries.
Apple hasn’t yet released Apple Intelligence in China, its second-most important market, weakening the iPhone’s appeal there. The company’s share of smartphone sales in China fell 2.4 percentage points last year to 15.5%, according to Counterpoint Research, a market research firm. Apple, which plans to make its AI offering available in additional languages in April, said sales in China fell 11% to $18.51 billion.
“Markets where we rolled out Apple Intelligence performed better on a year-over-year basis than markets where we had not,” Tim Cook, Apple’s CEO, said during a call with analysts.
In countries where Apple Intelligence is available, some of the features have disappointed customers. This month, the company said it would disable its AI system for aggregating and summarizing news notifications because it was misrepresenting media reports.
“There was so much optimism that they had the golden egg with the iPhone 16, but fast forward to today, and it feels like the rug has been pulled out from under them,” said David Wagner, head of equity at Aptus Capital Advisors, an investment firm in Alabama. “There’s been a slower AI uptake.”
In addition to trying to revitalize its iPhone business, Apple is confronting the possibility of fresh supply chain headaches. President Donald Trump has threatened to impose additional tariffs on goods from China, where Apple makes a majority of its iPhones, and on products shipped from countries, including Vietnam, where Apple had moved some of its manufacturing during the first Trump administration. Any levies would cut into Apple’s profits or force it to raise prices.
Cook has built a personal relationship with Trump over the years. He donated $1 million to Trump’s inauguration fund and sat behind Trump at the inauguration alongside other tech leaders, including Mark Zuckerberg and Jeff Bezos.
When asked during a call with analysts about what the new administration could mean for the company, Cook said, “We are monitoring the situation and don’t have anything more to add.”
Services, which include the sales of apps, Apple TV+ ,and Apple Pay, continue to be the strongest-performing segment of Apple’s business. The company is taking a cut of revenue from more than a billion subscriptions sold across iPhones and iPads. Sales of services in the quarter rose 14% to $26.34 billion.
A large percentage of service revenue comes from Google, which pays to be the search engine on Apple devices. Last year, a federal judge ruled that Google is a monopolist for paying those fees, and the Justice Department has asked the court to remedy that by forcing it to stop. Apple, which wants to keep the $20 billion it collects annually from Google, sought to intervene in the case but was denied.
Apple reported that sales rose for two of its other key products, the iPad and Mac, but fell for wearables such as the Apple Watch and AirPods. The company’s total product revenue increased 1.6% to $97.96 billion.
This article originally appeared in The New York Times.
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