Apple reports dip in iPhone sales over the holidays, despite AI rollout
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Apple on Thursday disclosed its iPhone sales dipped slightly during the holiday-season quarter, signaling a sluggish start to the trendsetting companys effort to catch up to the rest of Big Tech in the race to bring artificial intelligence to the masses.The iPhones roughly 1% drop in revenue from the previous years October-December period wasnt entirely unexpected, given the first software update enabling the devices AI features didnt arrive until just before Halloween, and the technology still isnt available in many markets outside the U.S.The countries still awaiting Apples AI suite include China, a key market where the company continued to lose ground. Although he didnt mention China, Apple CEO Tim Cook told investors on a conference call that a software upgrade enabling the AI features in more European markets, as well as Japan and Korea will be rolling out in April.But in the past quarter Apple also was only able to eke out a modest revenue gain across its entire business, although the results came in ahead of the analyst projections that guide investors. The Cupertino, California, company earned $36.3 billion, or $2.40 per share, a 7% increase from the previous year. Revenue edged up from the previous year by 4% to $124.3 billion.Those numbers included iPhone revenue of $69.1 billion. In China, Apples total revenue registered $18.5 billion, an 11% decrease from the previous year.Part of that erosion in China reflected the iPhones shrinking market share in that country, where homegrown companies have been making more headway. Apples iPhone year-over-year shipments in China declined nearly 10% in the most recent quarter, while native companies Huawei and Xiaomi posted year-over-year increases of more than 20%, according to the research firm International Data Corp.While China is a potential risk, we think the appeal of Apple products as a luxury product and the potential of AI innovations will keep demand steady in the country, Edward Jones analyst Logan Purk wrote in a research note assessing the companys quarterly report.The holiday-season results served to confirm bringing AI to the iPhone and Apples other products may not boost the companys recently lackluster growth as much as investors initially thought it might after Cook unveiled the technology before a rapt crowd last June.The anticipation that an AI-infused iPhone would prod hordes of consumers to ditch their current devices and splurge on an upgrade is the main reason Apples stock price surged by 30% last year. But the sinking realization that an uptick in demand may take longer than expected has caused Apples shares to backtrack by 5% during the first month of the new year. The stock initially slipped slightly in extended trading after the numbers came out, but later reversed course and rose by more than 3% after Cook said Apple is seeing a record number of people upgrading their iPhones.I could not feel more optimistic about our product pipeline, Cook said during the conference call. So I think theres a lot of a lot of innovation left on the smartphone.A management forecast calling for revenue that will at least match or exceed analyst projections for the January-March quarter also seemed to bolster investor confidence in the company.The concerns hovering around Apples weakening iPhone sales come against broader worries about whether AI will be as lucrative for U.S. tech companies as once envisioned after Chinese startup DeepSeek released a version of the technology that was built at a far lower cost than had been previously thought possible.Unlike tech peers such as Microsoft, Google corporate parent Alphabet Inc., and Facebook corporate parent Meta Platforms, Apple hasnt been investing as heavily in AIone of the reasons it has been seen as an industry laggard. But that restraint could work to its advantage if DeepSeeks early breakthroughs in driving down AI costs gains momentum.Apples services division remained the companys biggest moneymaker outside the iPhone, with revenue of $26.3 billion in the past quarter, a 14% increase from the previous year. Although the services division has been thriving for years, it generates more than $20 billion annually by locking in Google as the automatic search engine on the iPhone and other products. That deal is now under threat of being banned as part of the proposed punishment for Googles search engine being declared an illegal monopoly.Michael Liedtke, AP Technology Writer
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