Apple reported a sales decline in the third quarter, which is expected to continue into the current quarter. Despite surpassing Wall Street’s sales and profit expectations, Apple’s shares fell by 2%. The profit beat was driven by strong performance in the services segment, but disappointing sales of the iPhone dampened investor enthusiasm. Although executives stated that iPhone sales would improve, they did not provide specific details. Apple is facing tough competition from Android rivals in the mature smartphone market, while its much-anticipated Vision Pro mixed-reality headset has yet to be released.
In the fiscal third quarter that ended on July 1st, Apple reported a 1.4% decline in sales to $81.8 billion, with earnings per share increasing by 5% to $1.26. These results exceeded analyst expectations. Weaker iPhone sales were offset by strong performance in the services segment and sales growth in China. The company’s Chief Financial Officer, Luca Maestri, anticipates a similar revenue decline in the fiscal fourth quarter. This forecast is below analyst projections. Apple’s research and development spending has increased by $3.12 billion, primarily driven by work on generative artificial intelligence. The company aims to incorporate AI into its products as new features, such as the iPhone’s real-time voicemail transcription set to launch this autumn. Despite a challenging smartphone market in China, Apple outperformed its rivals and achieved double-digit growth in iPhone sales in the country. Overall, Apple’s performance in China was strong across various segments. Apple’s services segment, which includes Apple TV+, surpassed expectations with $21.21 billion in revenue. The company also reached a milestone of 1 billion subscribers on its platform. The wearables business, including the Apple Watch and AirPods, had revenue of $8.28 billion. Mac and iPad sales also exceeded analyst estimates. Apple CEO Tim Cook attributes the success to attracting new customers and strong upgrader activity.
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