Apple bets on AI to drive iPhone sales amid China slowdown

Apple Inc. reported stronger-than-expected iPhone sales for the third quarter and forecast continued growth, focusing on artificial intelligence (AI) to attract buyers despite disappointing results in its China market.

Shares of Apple rose nearly 1 per cent in extended trading, outperforming a generally lower tech sector. The company is preparing to launch what analysts are calling the most significant iPhone software upgrade this fall, featuring advanced AI capabilities. This move comes as competitors like Samsung have been quicker to introduce similar AI services.

Apple projected fiscal fourth-quarter revenue growth similar to the 4.9 per cent increase seen in the April-June period, which surpassed analysts' forecasts. iPhone sales fell just 0.9 per cent in the third quarter, a smaller decline than the 2.2 per cent drop analysts had anticipated.

Chief Financial Officer Luca Maestri noted, "The iPhone 15 family has been performing better than the previous cycle, the iPhone 14," citing stronger-than-expected results.

However, sales in China, Apple's third-largest market, decreased by 6.5 per cent. While this was an improvement from the 8.1 per cent decline in the previous quarter, it was worse than the anticipated 2.4 per cent drop, according to Visible Alpha. Excluding foreign exchange effects, sales in China fell by less than 3 per cent which Maestri attributed to the current economic softness.

To compete with cheaper local smartphones from brands like Huawei, Apple has implemented discounts on iPhones in China, offering reductions of up to 2,300 yuan ($317) on certain models.

Looking ahead, Apple is poised for a strong upgrade cycle with the anticipated iPhone 16 series, expected to be unveiled in September. At its developer conference in June, Apple introduced a suite of AI products and services under the banner of Apple Intelligence. These new features will require at least an iPhone 15 Pro, potentially encouraging users to upgrade.
 

(With Reuters inputs)