Apple earnings beat expectations, strong services offset weak ‎iPhone sales

On Thursday, Apple announced sales and profits that exceeded Wall Street expectations, despite a decline in iPhone sales, but the performance of its flagship phone in China helped it avoid a general decline in the smartphone market.

According to Reuters, Apple said that its sales for the third quarter of its fiscal year ending on July 1 fell 1.4% to $81.8 billion, and earnings per share rose 5% to $1.26. That beat analyst expectations for sales of $81.69 billion and earnings of $1.19 per share, according to IBES data from Refinitiv.

IPhone sales were slightly lower than analysts’ estimates, but were offset by strong sales of services including Apple TV+, as well as sales in China, which rose 8 percent year-on-year.

Apple has spent $22.61 billion on research and development since the beginning of the current fiscal year, an increase of about $3.12 billion over the same period last year.

The company’s chief executive Tim Cook said in an interview that the increase in research and development spending is driven, among other things, by the company’s work in generative artificial intelligence, the same area that is driving spending in other big technology companies as well.

“We have researched a wide range of AI technologies over the years, including generative AI,” Cook said. We will continue to invest, innovate and develop our products using these technologies to contribute to enriching people’s lives.”

Although China’s smartphone market recorded its weakest performance in nearly a decade, Apple’s sales outperformed. According to Counterpoint Research, total smartphone sales in China fell 8 percent in the second quarter of the year, to their lowest levels since 2014. But Cook told Reuters that iPhone sales in China increased by “a double-digit number.”

Apple said iPhone sales amounted to $39.67 billion, missing analysts’ expectations of $39.91 billion, according to Refinitiv data.

The company said that its revenues from the services segment amounted to $ 21.21 billion, compared to analysts’ estimates of $ 20.76 billion, according to Refinitiv data.

Cook said Apple now has 1 billion subscribers on its platform, which includes Apple services and third-party apps, up from 975 million subscribers in the previous quarter.

The company’s revenue from wearable devices, including the Apple Watch and AirPods, was $8.28 billion, compared to analyst estimates of $8.39 billion, according to Refinitiv data.

The company’s sales of Mac and iPad devices were $6.84 billion and $5.79 billion, respectively, compared to analyst estimates of $6.62 billion and $6.41 billion, according to Refinitiv data.