Apple’s (AAPL.O) focus on Thursday would be to add generative AI to its iPhone and revive sagging sales in the crucial Chinese market. This is when the tech giant, Apple is expected to report its biggest quarterly revenue decline in more than a year.
On Wall Street always considered a must-own stock, Apple shares have been under performing in comparison to other Big Tech companies in recent months. Apple stock has been falling more than 10% this year as fears mount about its slow roll-out of artificial intelligence (AI) services. Also resurgence of Huawei (HWT.UL) which has taken market share in China has affected Apple iPhone sales.
Apple iPhone sales
Analysts on average see iPhone sales falling 10.4% in the first three months of 2024, which account for about half of Apple’s revenue, according to LSEG. That Apple iPhone sales drop would be the steepest in more than three years.
The year-ago iPhone revenue that the 10.4% iPhone sales drop is measured against was unusually high as Apple satisfied pent-up demand after the COVID pandemic, company executives previously noted.
At least $5 billion of the $51.3 billion in iPhone sales a year ago was essentially catching up from disruptions in the December 2022 quarter when COVID lockdowns in China hampered iPhone production, executives said.
Apple quarterly revenue
Apple investors anticipation is a slight decline in iPhone sales, and analysts estimate Apple’s total revenue declined 5% in its fiscal second quarter ended in March. That would be Apple’s biggest revenue decline since the December 2022 quarter, when revenue fell 5.5%.
Apple lost top spot
Earlier this year, Apple lost the crown of the world’s most valuable company to Microsoft. Its market value stands at $2.68 trillion after the share price declined 11.24% so far this year.
Apple iPhone sales with AI
The fall in shares and lower revenue has pressured Apple to spruce up its flagship device after years without major upgrades.
Apple is in talks with OpenAI and Google to add generative AI features for the iPhone that could be unveiled at what is expected to be its biggest-ever annual developer conference in June, as per a report.
Analysts believe such an AI integration could drive demand for the next iPhone series, expected to be announced in the fall.
While executives at Microsoft, Alphabet and other major technology firms have upped their AI strategies on quarterly conference calls in recent months. There has been less plans for the same from Apple’s CEO Tim Cook.
AI features can help with competition
Adding AI features to iPhones could also help Apple to compete better with Huawei and Samsung.
“Replacement cycle tailwinds and incremental generative AI features set up Apple well for a strong iPhone 16 cycle,” Bernstein analyst Toni Sacconaghi said this week.
“We believe prevailing weakness in China is more cyclical than structural, and note historically Apple’s China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base.”
Apple’s earnings
Thursday’s earnings will also be watched closely for updates on the company’s stock buyback plan and the Vision Pro, Apple’s first major product in years that hit the shelves in February.
After initial enthusiasm, there have been signs that demand slowed for the $3,500 device, with an analyst saying this month that Apple has pulled back its production estimates for the mixed-reality headset.
The rest of the company’s hardware business is also reeling from soft demand, with iPads and Mac sales expected to fall 11.4% and 4.3%, respectively, in the March quarter.
The services business, which includes App Store and subscription services such as Apple TV, is expected to remain a bright spot with revenue growth of 7.7%.
Apple stock
Apple shares closed down 0.6% at $169.30 on Wednesday.
