Apple earnings: tech giant faces likely 10% fall in iPhone sales, questions on AI push

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on May 1, 2024
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  • The focus will likely be on Apple's initiatives to integrate generative AI into its iPhones.
  • While competitors like Microsoft, Alphabet, and Meta Platforms have been vocal about their AI strategies.
  • This sector includes earnings from the App Store and various subscription services such as Apple TV.

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On Thursday, Apple Inc. (AAPL.O) is set to disclose its quarterly earnings, which analysts predict will show the largest revenue decline for the company in over a year.

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The focus will likely be on Apple’s initiatives to integrate generative AI into its iPhones and its strategy to recover declining sales in the vital Chinese market.

Revenue and sales forecasts signal challenges

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Analysts expect that iPhone sales, which make up roughly half of Apple’s revenue, have fallen by 10.4% in the first quarter of 2024.

This significant drop, the steepest in more than three years, reflects broader challenges within the tech giant’s operations.

Overall, Apple’s revenue is estimated to have declined by 5% during the quarter spanning January through March, marking the most substantial decrease since late 2022.

Stock performance and strategic responses

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Apple shares have seen a decline of more than 10% year-to-date, underperforming in comparison to other major tech firms.

This downturn has been influenced by Apple’s slow adoption of AI technologies and increasing competition, notably from a resurgent Huawei (HWT.UL), which has been regaining market share in China.

AI integration as a strategic pivot

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In a bid to rejuvenate its flagship product line, Apple is reportedly in discussions with OpenAI and Google to enhance the iPhone with advanced AI capabilities.

These features are expected to be a major highlight at Apple’s largest-ever annual developer conference in June.

The anticipated AI integration could boost consumer interest in the next series of iPhones, scheduled for release in the fall.

Competition from global tech leaders

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While competitors like Microsoft, Alphabet, and Meta Platforms have been vocal about their AI strategies, Apple has been relatively quiet about its plans.

The addition of AI features to iPhones is seen as a crucial step for Apple to maintain its competitive edge against companies like Huawei and Samsung Electronics, which recently overtook Apple as the world’s top smartphone vendor.

Upcoming product updates and hardware challenges

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Apple’s earnings will also provide insights into its stock buyback program and the performance of the Vision Pro, Apple’s latest major product release.

Despite initial strong interest, the $3,500 mixed-reality headset has seen waning demand, prompting adjustments in production estimates.

The company is also experiencing softer demand across other hardware segments, with expected sales declines in iPads and Macs during the March quarter.

However, Apple is set to refresh its hardware offerings, with updates planned for every Mac model and a new iPad lineup anticipated later this month.

Services sector remains a growth area

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Despite challenges in hardware sales, Apple’s services division is expected to continue its growth trajectory, with a projected revenue increase of 7.7%.

This sector includes earnings from the App Store and various subscription services such as Apple TV.

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