Apple reported better-than-expected earnings for the third quarter of 2024, with buzz about its new artificial intelligence features offsetting a continued decline in its key market, China.
Earnings beat analysts’ forecasts despite a year-over-year drop in iPhone sales, with revenue up 4.9% to $85.78 billion in the three months ended June 29, beating analysts’ average estimate of $84.53 billion. The company maintained its cash dividend at 25 cents per share.
The strong report represented a bright spot in the tech space after struggling earnings reports from other tech giants like Amazon, Snap and Intel. The market saw a sell-off Thursday amid disappointing results, including from Intel, which announced plans to cut more than 15,000 jobs as it tries to trim billions of dollars in costs to turn around its business. Amazon shares also fell more than 4% Thursday after the company reported lower-than-expected sales this quarter and forward-looking statements that indicated a continued slowdown in the next.
Investors were eager for updates on Apple’s sales in China, the company’s third-largest market, where its market share has been in decline. Apple dropped out of the top five smartphone vendors in the country for the first time earlier this year, overtaken by local brands such as vivo, OPPO and Huawei. Third-quarter earnings results showed sales in China fell 6.5% to $14.73 billion, more dramatically than the 2.4% decline analysts had predicted.
On a call with investors, Apple CEO Tim Cook addressed these concerns and attributed some of the delay to exchange rate fluctuations. Cook said that at constant exchange rates, the decline was less than 3% and that iPad sales are growing again in that country.
“We remain confident in the long-term opportunities that China offers,” he said. “I don’t know how to read each chapter of the book, but we are very confident in the long term.”
Although sales in China struggled, overall iPhone sales were better than expected, falling 0.9% to $39.3 billion, smaller than the 2.2% decline analysts had expected. That improvement was due in part to rising demand in anticipation of Apple’s launch of its new iPhone. artificial intelligence features it announced at its annual WWDC developers conference in June.
The tech company’s foray into artificial intelligence includes a range of generative AI tools built into the operating systems of its devices, including a partnership with OpenAI that integrates into its Siri voice assistant.
Those AI features will only be available on iPhone 15 Pro models and later, but analysts say this report shows a good start. Apple typically announces new devices in September, so analysts will be watching closely to determine how AI announcements will impact future sales.
“It’s an incredibly strong quarter for Apple, validating the company’s turnaround to become the leading player in the consumer AI space,” said Thomas Monteiro, senior analyst at Investing.com“These numbers should be even better once AI capabilities hit the market in the coming quarters.”
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The company also reported substantial growth in iPad sales. The segment rose 23.7% to $7.16 billion, above analysts’ expectations of $6.61 billion, after Apple launched a new AI-focused iPad Pro and a larger iPad Air in May to revive demand for a product line that had languished for the past two years.
In the company’s wearables segment, which accounts for sales of Apple Watches and AirPods earphones, sales fell 2.3% to $8.1 billion, compared with analyst estimates of $7.79 billion.
Reuters contributed reporting