Apple Surpasses Sales and Profit Expectations with iPhone 16 Launch
Apple Inc. (NASDAQ:AAPL) exceeded Wall Street's sales and earnings expectations in its financial fourth-quarter results announced on Thursday. The company's performance was significantly bolstered by the successful early sales of the iPhone 16, which was launched towards the end of the quarter and caters to new artificial intelligence (AI) features.
The tech giant reported $94.93 billion in sales, surpassing Wall Street's projections of $94.58 billion, according to LSEG data. Excluding a significant one-time tax burden in the European Union, earnings per share reached $1.64, exceeding analysts' estimates of $1.60.
The key driver behind Apple's impressive results was the iPhone, the brand's flagship product. iPhone sales rose by 5.5% to $46.22 billion, exceeding the $45.47 billion anticipated by analysts. However, other product lines did not meet expectations, leading to a roughly 1% decline in Apple shares during after-hours trading.
The fourth quarter, which ended on September 28, included only a few days of sales for the iPhone 16 series, which was released on September 20. Apple CEO Tim Cook noted that the iPhone 16 showed faster sales growth compared to the iPhone 15 over the same number of days in last year's fourth quarter. Cook also highlighted that the adoption rate of the new version of the iPhone operating system, which includes Apple Intelligence features, was twice that of last year.
The success of Apple's AI strategy, introduced earlier this year, is largely tied to the sales of its new phones. Instead of offering AI as a separate application or service, Apple integrated Apple Intelligence features into its latest operating systems.
Features such as the ability to improve the tone of an email are primarily available on the iPhone 16 models, equipped with more powerful processors. The pro versions of the iPhone 15 are also compatible with Apple Intelligence.
While some Apple Intelligence features were introduced this week, others have been postponed. This situation has led to speculation among Wall Street analysts about whether consumers will delay upgrading their devices. However, the initial sales results of the iPhone 16 may alleviate those concerns. iPhone sales contributed to stabilizing Apple's fourth-quarter sales in China. Sales in China decreased slightly by less than 1% to $15.03 billion, which was slightly below the expected $15.78 billion.
Apple's capital expenditures, reflecting spending on property and equipment, increased by $2.91 billion compared to the previous quarter, reaching $9.45 billion. This increase in spending coincides with rival companies like Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) ramping up their investments in AI strategies. Apple uses third-party data centers for some AI tasks, its own data centers for others, and employs custom chips to support these features.
In other areas, Apple’s services segment, which includes iCloud and Apple Music, generated $24.97 billion in sales, falling short of the $25.28 billion estimate. Sales of Macs and iPads also fell below expectations at $7.74 billion and $6.95 billion, respectively. Sales in the home and wearables segment, which includes products like Apple Watch and AirPods, dropped to $9.04 billion, compared to expectations of $9.2 billion.
When including the European Union tax burden, earnings per share were reported at 97 cents.