Apple Remains Mysterious About AI While Posting New Revenue Record for Services Amid iPhone Sales Decline

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Alexa Doe
Julian Doe

Apple’s fiscal second quarter reveals declining iPhone sales but record services revenue, with hints of big AI plans to come

Apple Inc. (NASDAQ: AAPL) released its fiscal second-quarter results on Thursday, revealing a slight revenue drop and a decline in iPhone sales. Despite the dip, the tech giant surpassed Wall Street expectations and announced its largest-ever share buyback, authorizing $110 billion in repurchases—a 22% increase compared to last year’s authorization.

Fiscal Second Quarter Highlights
Revenue dropped 4% year-on-year to $90.75 billion, surpassing LSEG’s estimate of $90.01 billion. Net income decreased by 2% to $23.64 billion, or $1.53 per share, while gross margin stood at 46.6%, in line with LSEG’s estimate.

Apple’s revenue structure is undergoing significant changes. iPhone sales fell 10% year-on-year to $45.96 billion, just below LSEG’s estimate of $46 billion. CEO Tim Cook highlighted that the decline was due to challenging comparisons from last year, which included $5 billion in delayed iPhone 14 sales due to COVID-19 supply issues.

Mac revenue rose 4% year-on-year to $7.5 billion, driven by new MacBook Air models with the upgraded M3 chip released in March, exceeding LSEG’s estimate of $6.86 billion. iPad revenue dropped 17% to $5.6 billion, missing the LSEG estimate of $5.91 billion. Other products brought in $7.9 billion, also falling short of LSEG’s projection of $8.08 billion.

Services were a bright spot for Apple, generating $23.9 billion in revenue and exceeding LSEG’s estimate of $23.27 billion, with the segment growing 14.2% year-on-year.

Tim Cook, Apple CEO

An Unclear Outlook
Although Apple did not provide an official forecast, CEO Tim Cook suggested “low single digits” sales growth for the June quarter, while CFO Luca Maestri mentioned double-digit year-on-year growth in iPad sales, with services continuing to grow at the latest reported rate. New iPad models expected in May are anticipated to revive demand.

What About AI?
Generative AI remains a mystery in Apple’s plans. CEO Tim Cook hinted at the company’s ambitions, saying Apple has “big generative AI plans that will differentiate it from its competitors.” However, he did not elaborate further, leaving many questions unanswered. With the WWDC developer event in June, the tech community is eager to learn more about Apple’s AI roadmap.

Meanwhile, other tech giants have been vocal about their AI investments. Meta Platforms (NASDAQ: META) CEO Mark Zuckerberg confirmed that Meta is spending heavily on AI, acknowledging that it may take years to generate profits. In comparison, Apple’s silence on AI has generated curiosity about its strategy in the rapidly evolving space.

The tech giant’s continued success in services and the record share buyback authorization indicate confidence in its future, but much anticipation surrounds the company’s next move, particularly in AI.

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