Apple iPad sales up, iPhone sales down, as Services posts record $24 billion revenue
Customers await “Apple Intelligence”
Apple Q3 earnings showed a bump in Mac and iPad sales, but a continued dip in iPhone sales as customers wait for the new “Apple Intelligence” features to roll out to iOS18 later this year, in what CEO Tim Cook called a “staggered release.”
All eyes are on the company as it places Apple Intelligence at the center of its growth strategy, as it aims to assure investors that it hasn’t fallen behind in the race to deploy AI everywhere, like its competitors. Apple has already delayed the rollout of some of its promised features of Apple Intelligence, though this week it released an iOS18 beta release with a subset of the features for developers to test.
Apple CEO Tim Cook said iOS integration with OpenAI’s ChatGPT will arrive by the end of the calendar year, while other features will arrive with iOS18’s fall release. On Apple’s Q3 earnings call, Cook said, “We're taking this first step in getting the beta out there, and we can't wait to see what kind of amazing things they do with it.”
New iPad Air and iPad Pro models led to a 24% increase in sales year-over-year. iPhone sales showed a second consecutive quarterly decline of 1%, generating $39.2 billion in sales with a larger 6.5% decline of iPhone sales in Greater China.
Services, which includes App Store, Apple Music, iCloud, and AppleTV+, reached a new high with $24 billion in revenue, a 14% increase year-over-year.
On the earnings call, Tim Cook was asked if there was pent-up demand for new, faster iPhones to take advantage of the forthcoming AI features.
Cook said, “It's very difficult mid cycle to call upgrade rates. I would just say that with Apple Intelligence, we're very excited about the level of value that we're going to provide to users, and we believe that that presents another reason for a compelling upgrade.”
This week Meta and Microsoft both told investors to prepare for huge investments in AI infrastructure going forward. On the call, Cook said that Apple has been investing in AI and machine learning for years, sometimes re-deploying internal resources to the effort, so the reported numbers may not reflect the true investment.
“On the capex part, it's important to remember that we employ a hybrid kind of approach, where we do things internally, and we have certain partners that we do business with externally, where the capex would appear in their respective businesses. But, yes you can expect that we will continue to invest and increase it year on year,” said Cook.
