Thursday, when the tech giant is expected to report its biggest quarterly revenue drop in more than a year, all eyes will be on Apple’s plan to add generative AI to its iPhones and boost sales in China, which is a very important market.
Wall Street used to think that Apple was a must-own stock, but recently its shares haven’t done as well as those of other Big Tech companies. They’ve dropped more than 10 percent this year as worries grow about its slow rollout of AI services and Huawei gains market share in China.
LSEG says that analysts think iPhone sales will drop 10.4 percent in the first three months of 2024. These sales make up about half of Apple’s revenue. It would be the worst drop in more than three years.
Apple executives have said that the revenue from iPhone sales last year, which is used to compare the 10.4 percent drop in sales this year, was unusually high because the company met pent-up demand after the COVID pandemic.
Executives said that at least $5 billion of the $51.3 billion in iPhone sales a year ago was basically making up for the fact that production was slowed down by COVID lockdowns in China in the December 2022 quarter
Even with that in mind, Wall Street still thinks iPhone sales will go down a little, and analysts think Apple’s total revenue went down 5% in its fiscal second quarter, which ended in March. That would be Apple’s biggest drop in sales since the December 2022 quarter, when sales dropped 5.5%
Early this year, Microsoft passed Apple as the most valuable company in the world. Its market value is now $2.68 trillion, even though the price of its shares has dropped 11.24 percent so far this year.Apple had to fix up its most popular device after years of not getting any major updates because of weak sales and falling stock prices.
Bloomberg News reports that the company is in talks with OpenAI and Alphabet-owned Google to add genAI features to the iPhone. These features could be shown off at the company’s biggest-ever annual developer conference in June.
Analysts think that this kind of AI integration could make people want to buy the next generation of iPhones, which are expected to be released in the autumn.
Tech company leaders from Microsoft, Alphabet, Meta Platforms, and other big names have been talking up their AI plans on quarterly conference calls over the past few months. However, Tim Cook, CEO of Apple, has talked much less about his plans for the new technology.
Apple could also do better against Huawei and Samsung Electronics by adding AI features to its iPhones. Because of demand for the AI features in its Galaxy S24 smartphones, Samsung Electronics took back the title of world’s top smartphone maker from Apple this year. People will also be paying close attention to Thursday’s earnings report for news about the Vision Pro, Apple’s first big product in years that came out in February.
There were early signs that the $3,500 device wasn’t selling as well as people thought it would. This month, an analyst said that Apple had lowered its production estimates for the mixed-reality headset.
The rest of the company’s hardware business is also struggling because demand is low. In the March quarter, sales of iPads and Macs are expected to drop 11.4% and 4.3 %, respectively.
Apple has shown that it is focusing more on the devices, which have also been slowed down by not getting any major updates in a while.
At an event this month, Apple is likely to show off a new line of iPads, and news reports say the company plans to update all of its Macs with faster M4 processors that are optimised for AI.
Expect the services business, which includes the App Store and subscription services like Apple TV, to continue to do well. Its revenue is expected to grow by 7.7 percent this year.
Shares of Apple fell 0.6% on Wednesday, ending the day at $169.30.
