- Apple achieves new records for company revenue and earnings
- Shares higher in pre-market trading
- Still feels as if Apple is slow to capitalise on AI demand
- China competition remains intense and that’s having a negative impact on iPhone sales in that part of Asia
“Apple is selling products and services by the bucketload,” says Dan Coatsworth, investment analyst at AJ Bell.
“It has set new records for revenue and earnings and has declared its best quarter ever. The company has now beat earnings expectations for eight quarters in a row and these factors have helped to drive up the share price in pre-market trading. So far, so good – but there is a lingering feeling that the business could be doing a lot better when it comes to innovation and strategy.
“The roll-out of AI services on iPhone 16 hasn’t exactly gone smoothly. Having been late to the AI party in the first place, Apple still hasn’t rolled out AI services in any non-English language. This cautious pace seems odd when you consider AI has exploded onto the scene and consumers increasingly have a lot of choice for AI-enabled devices. It’s like a carrot dangled in front of Apple and it only wants to nibble at it, rather than devour the whole thing.
“Consumers need a reason to upgrade their phone, otherwise they’re going to stick with their current model given how even the cheapest devices are fairly sophisticated these days. Apple is clearly hoping its AI services will be the catalyst to drive handset upgrades, but it’s going about it in a strange way.
“China remains one of Apple’s biggest problems. Competition is fierce from domestic smartphone makers Huawei and Xiaomi, and consumers aren’t spending with such confidence as pre-Covid days. It means Apple is riding uphill with considerable headwinds.
“The iPhone is meant to be Apple’s bread and butter yet it’s no longer the big earnings growth driver. Group product revenue gains over the past quarter were predominantly driven by the iPad and Mac.
“It’s lucky that Apple has a portfolio of items so it isn’t reliant on one product line, yet the fact the iPhone seems to be slipping in importance puts the pressure on the group to come up with something truly new, not simply an upgraded version of existing products. Android phones continue to grow in popularity and are generally cheaper than the iPhone – that’s a big problem for Apple.
“Apple boss Tim Cook said on the conference call that there is ‘a lot of innovation left on the smartphone’. That suggests Apple still believes the iPhone can be much more useful to people’s lives than it is today, implying it will continue down the path of device upgrades rather than launching something completely different.
“Apple has forged a reputation for being the master of innovation when it comes to electronic devices. It’s always had challengers nipping at its toes but it has reached the point where Apple now needs to pull a rabbit out of the hat to truly wow the world. Otherwise, it risks getting lost in the crowd.”
