Apple reported record-breaking iPhone upgrades in its fiscal first quarter, driven by the rollout of Apple Intelligence rollout. CEO Tim Cook confirmed that more users upgraded than in any previous period.
Apple Intelligence, the company’s AI suite, is available on iPhone 15 and iPhone 16 models. Cook highlighted that iPhone 16 sales outperformed iPhone 15 in the months following its launch. Markets where Apple Intelligence is available saw stronger demand, confirming AI’s impact on sales.
Sales Growth Despite Market Challenges
Despite the surge in upgrades, Apple’s iPhone sales declined slightly. The company reported a 1% year-over-year drop, bringing iPhone revenue to $69.14 billion. However, executives expect AI-driven upgrades to boost future sales. Unlike competitors such as Microsoft, Apple integrates AI directly into its devices rather than investing heavily in data centres.
Investors reacted positively to Apple’s sales outlook. The company’s stock rose 3.14% in post-market trading after executives signalled a recovery in iPhone demand. Analysts believe Apple’s AI-driven upgrades will help the company rebound, particularly in China, where the Apple Intelligence rollout is yet to happen.
Challenges in China and Global Expansion
Apple faces challenges in China, where iPhone sales dropped from $20.82 billion to $18.51 billion year-over-year. The company continues to struggle against rising competition from Chinese smartphone makers such as Huawei and Vivo. Without Apple Intelligence, iPhones lose some appeal among Chinese buyers, contributing to Apple’s market share decline.
Cook acknowledged China’s regulatory challenges but confirmed Apple’s commitment to launching Apple Intelligence there. While the company has not provided a timeline, Cook said Apple is working with regulators to introduce AI features as soon as possible.
Apple Intelligence will expand to more global markets in April. The company plans to roll out AI features in French, German, Italian, Portuguese, Spanish, Japanese, Korean, and simplified Chinese. It will also introduce localized English versions for Singapore and India.
Apple Intelligence Features Drive Demand
Apple Intelligence features focus on enhancing user experience with AI-powered tools such as email drafting, call transcriptions, and an improved Siri. These features drive demand for iPhone 15 and iPhone 16 models, increasing customer upgrades.
Cook expressed confidence in Apple Intelligence becoming mainstream. “Once you start using these features, you can’t imagine not having them,” he said.
Apple is also extending its AI capabilities to Macs and iPads. Last quarter, Mac sales reached $8.99 billion, while iPad sales hit $8.09 billion. Both figures exceeded expectations. The introduction of new Mac Minis, iMacs, and MacBook Pros with Apple’s M4 chip played a key role in driving upgrades.
Future Outlook and Strategy
Apple’s cautious AI rollout strategy contrasts with competitors that have aggressively invested in artificial intelligence. Instead of spending on large-scale AI infrastructure, Apple focuses on seamless integration into its hardware ecosystem. This approach has helped maintain a strong demand for its devices.
Apple’s services division also performed well. Revenue from services, including iCloud, Apple Music, and Apple TV+, grew 13.9% year-over-year to $26.34 billion. The firm’s wearables segment, which includes Apple Watch and AirPods, generated $11.75 billion in sales.
Analysts remain optimistic about Apple’s future. Gil Luria, managing director at D.A. Davidson, stated, “The management’s guidance exceeded expectations as the iPhone gains momentum and Apple recovers from a tough quarter in China.”
Apple’s leadership believes AI will continue driving demand for new devices. As Apple Intelligence expands globally, sales are expected to rise. Cook and his team remain focused on using AI to strengthen Apple’s position in the premium smartphone market.
With a strong product lineup, expanding AI features, and solid financials, Apple is positioned for long-term growth despite short-term market challenges.
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