Apple Inc. has reported that its quarterly profits and revenue for the December period exceeded Wall Street expectations, despite facing stiff competition in China that resulted in lower iPhone sales. The tech giant announced a revenue of $124.3 billion, surpassing the Bloomberg poll estimate of $124.1 billion, marking a 4% increase from the previous year’s corresponding quarter. Net income rose by approximately 7% to $36.3 billion, which was also above the anticipated $35.5 billion.
However, iPhone sales fell short, registering $69.1 billion against expectations of around $71 billion. This downturn was particularly pronounced in China, where Apple’s revenue decreased by 11% to $18.5 billion. This decline is attributed to intensified competition from local brands like Huawei and Xiaomi, which have been gaining market share.
Financial Outlook and AI Impact
Looking forward, Apple expects revenue growth in the low to mid-single digits for the March quarter, although this forecast includes an expected negative impact of about 2.5 percentage points due to foreign exchange rates. The company has recently introduced Apple Intelligence, a suite of AI features in partnership with OpenAI, which has so far been limited to English-speaking markets with plans for expansion to other languages in April.
Apple’s Chief Financial Officer, Kevan Parekh, who assumed his role this year, expressed optimism about the transformative potential of AI. He noted that the performance of the AI-enabled iPhone 16 was significantly better in regions where Apple Intelligence was available, indicating consumer interest in these new features. CEO Tim Cook also highlighted this as a “positive indicator” during an analyst call.
Services and Other Products
Despite the challenges with iPhone sales, Apple’s services sector, encompassing the App Store, iCloud, and Apple Pay, achieved a record revenue of $26.3 billion. Both iPad and MacBook products also reported double-digit growth, contributing positively to the quarter’s overall performance.
Market Reactions and Broader Economic Context
Apple’s shares saw a 3% increase in after-hours trading following the earnings announcement, which helped mitigate concerns over the iPhone sales shortfall. Analyst Gene Munster from Deepwater Asset Management commented that the current quarter’s guidance was encouraging.
However, broader economic factors loom large, including potential impacts from U.S. trade policies. President Donald Trump has announced plans for tariffs on Taiwanese semiconductor manufacturers, which could affect Apple’s supply chain given its heavy reliance on Asian exporters. CFO Parekh chose not to comment extensively on these risks, only stating that the company is monitoring the situation closely.
Market Position and Competitor Performance
This earnings report comes at a time when the tech sector has seen volatility, particularly with Nvidia facing a significant drop in market cap due to concerns over AI advancements by competitors like China’s DeepSeek. Despite this, Apple’s market valuation remains robust at about $3.6 trillion, making it the world’s most valuable company.
In summary, while Apple navigates challenges in key markets like China and braces for potential trade policy impacts, the introduction of AI features and strong performance in services and other product lines provide a counterbalance, driving optimism for future growth.
