Apple reports robust demand for iPhone 16 even as overall sales in China slow | Apple

Apple reported strong demand for the iPhone 16 in its quarterly earnings report on Thursday, though overall sales in China slightly decreased year-over-year. The company reported $94.9bn in revenue, up 6% year-over-year, and $1.64 in earnings per share (EPS). The company’s earnings slightly beat Wall Street projections of $94.4bn in sales and an EPS of $1.60.

The company saw $46.2bn in revenue from iPhone sales, up from $43.8bn year-over-year. Fourth-quarter revenue from its services division, which include subscriptions, increased from $22.31bn to $24.97bn year-over-year.

The company also said it saw a one-time fee of $10.2bn due to the reversal of a European general court decision that required Apple to pay Ireland back taxes.

The earnings report is the first look at demand for the iPhone 16, which Apple released days before the end of the fourth quarter. The launch of the latest iPhone was expected to be a boon for Apple in China and could enable it to claw back market share, according to an analysis by market intelligence firm International Data Corporation. Due to tight competition from players such as Huawei and Xiaomi, the company had fallen to sixth place among smartphone sellers last quarter.

In a statement, the CEO, Tim Cook, touted the release of the company’s “best products yet”, which included Apple Intelligence in addition to the iPhone 16.

“And this week, we released our first set of features for Apple Intelligence, which sets a new standard for privacy in AI and supercharges our lineup heading into the holiday season,” Cook said in a statement.

The company would not go into detail about whether it expects Apple Intelligence to juice demand for its products over the holiday season.

“We’re very early in the cycle with a lot of new products and features that we are launching,” Apple’s chief financial officer, Luca Maestri, said. “We’re very excited about them, but its early and the Apple intelligence roll out is going to happen over time not across the world as normally we do with software releases.”

Apple has struggled with flagging demand for its other devices over the past year. Sales of its wearable devices such as the Apple Watch and Airpods have declined for four straight quarters. Sales of the Vision Pro headset, Apple’s first new hardware product in the better part of a decade, have also failed to take off.

In addition to the latest on iPhone 16 demand, investors looked for updates on the company’s slow roll out of its suite of AI features called Apple Intelligence, which is included in the latest version of Apple’s iPhone operating system.

On the earnings call on Thursday, Cook said that in the three days since releasing Apple Intelligence consumers have downloaded the new iOS update, 18.1, twice as fast as they downloaded 17.1 a year ago.

“There’s definitely interest out there in Apple Intelligence,” Cook said.

Cook has defended the company’s decision to take its time releasing a competitor to Google’s Gemini, OpenAI’s ChatGPT and Meta AI. In an interview with the Wall Street Journal, he said the company wanted to focus on creating the best AI assistant, not the first.

“We weren’t the first to do intelligence,” he said. “But we’ve done it in a way that we think is the best for the customer.”

The bare-bones version of Apple Intelligence, which some users got a hold of in a limited release, has had some trouble on the intelligence front. The AI feature has woefully misinterpreted news alerts and shared inaccurate summaries, according to several examples users have shared on social media.

The company plans to roll out additional features in December and over the next few months, said Cook. He indicated on the earnings call that future iterations may be far more advanced.

“I’m on future releases of Apple Intelligence and it’s changing my life,” he said.

The company has not rolled out the feature in important markets such as Europe and China, where it still faces steep competition. Apple has also faced some pressure in other parts of Asia. Indonesia banned iPhone 16 sales after the government said the company failed to come through on its promise to invest more in the local economy.