Apple forecasts stronger growth amid AI push, shares rise post-earnings call

Apple’s latest earnings report has driven a surge in its stock price, with the company projecting stronger-than-expected sales for the upcoming quarter. The Cupertino-based tech giant credited its artificial intelligence (AI) integration and stronger Mac and iPad sales for the positive outlook, even as iPhone sales and revenue from China showed signs of weakness.

Sales Forecast Surpasses Expectations

During its fiscal Q1 earnings call, Apple executives indicated that revenue for the March quarter is expected to rise in the low- to mid-single-digit range, after accounting for a 2.5% foreign exchange impact. This projection exceeds Wall Street’s expected 5% growth to $95.3 billion, according to LSEG data. Following this announcement, Apple shares climbed 3.14% in after-hours trading.

Kevan Parekh, Senior Vice President and Chief Financial Officer, also highlighted that the company’s gross margin for the upcoming quarter would range between 46.5% and 47.5%, with the upper end surpassing analyst expectations of 47.01%.

AI Features Driving Sales, Despite iPhone Slowdown

Apple’s revenue for the fiscal first quarter ended December 28 stood at $124.3 billion, slightly surpassing Wall Street’s expectations. However, iPhone sales dropped to $69.14 billion from $71.03 billion a year earlier. China revenue also fell to $18.51 billion, down from $20.82 billion last year, as competition from local brands like Huawei intensified.

CEO Tim Cook acknowledged the company’s cautious AI rollout but pointed to strong consumer demand where AI-powered features have already launched. “We saw that in markets where we have rolled out Apple Intelligence, the year-over-year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available,” Cook said.

However, AI-enabled features are yet to be introduced in China due to regulatory hurdles. Cook stated that Apple is working with regulators but provided no specific timeline for their release.

Mac and iPad Sales Outperform, Services Surge

While iPhone sales faced headwinds, Apple’s Mac and iPad segments saw significant gains. The company reported $8.99 billion in Mac revenue and $8.09 billion in iPad sales, both exceeding analyst expectations. The strong performance was driven by the launch of new MacBooks, iMacs, and Mac Minis powered by Apple’s latest M4 chip.

Apple’s services business, which includes iCloud, Apple Music, and Apple TV+, continued its upward trajectory, reaching $26.34 billion in revenue, a 13.9% year-over-year increase. Analysts see this segment as a stabilizing force for Apple amid fluctuations in hardware sales.

Wearables Dip Slightly, but Apple Remains Optimistic

Apple’s wearables segment, including Apple Watch and AirPods, posted $11.75 billion in sales, slightly below analyst forecasts of $12.01 billion. Despite this, Cook expressed confidence in the category, citing the continued expansion of Apple’s health-focused initiatives.

India Market Doing Well

During the earnings call, Cook also said, “We’re bringing Apple Intelligence to more languages, including French, German, Italian, Portuguese, Spanish, Japanese, Korean, and simplified Chinese, as well as localized English to Singapore and India.”

“The iPhone Active Install Base grew to an all-time high in total and in every geographic segment. We also set an all-time record for upgraders. According to a recent survey from Kantar, during the December quarter, iPhone was a top-selling model in the U.S., urban China, India, the UK, France, Australia, and Japan,” he added. 

Parekh mentioned, “We have great results in a number of emerging markets, and as you know from past calls, particularly keen on India. India set a December-quarter record during the quarter, and we’re opening more stores there, we’ve announced that we’re going to open four new stores there. The iPhone was the top-selling model in India for the quarter, and it’s the second-largest smartphone market in the world and the third-largest for PCs and tablets, and so there’s a huge market, and we have a very modest share in these markets, and so I think there’s lots of upside there, and that’s just one of the emerging markets.”

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