Apple Reports 10% Drop in iPhone Sales Amidst AI Concerns

In its quarterly earnings report released on Thursday, Apple disclosed a significant 10% decline in iPhone sales for the second fiscal quarter, falling from $51.33 billion to $45.96 billion year-over-year.

The slump was particularly pronounced in China, with an 8% decrease contributing to the overall downturn.

Analysts speculate that Apple's comparatively slower integration of artificial intelligence (AI) technology, in contrast to rivals like Google and Microsoft, may have influenced consumer decisions to defer purchasing new iPhones.

While Apple has hinted at forthcoming AI-related announcements, particularly anticipated at the upcoming Worldwide Developers Conference (WWDC) in June, the release of the iPhone 16 is not expected until the autumn.

During the earnings call, CEO Tim Cook addressed the sales figures, highlighting the impact of supply disruptions caused by the COVID-19 pandemic in the previous year.

He noted, "If we remove this from last year’s results, our March quarter total company revenue this year would have grown."

Despite the downturn in hardware sales, Apple surpassed Wall Street expectations, leading to a surge of over 6% in stock value after hours.

This boost was attributed to increased revenue from services and a substantial $110 billion stock buyback program, exceeding the previous year's $90 billion repurchase.

Services revenue, encompassing offerings like iCloud, Apple TV+, and Apple Music, witnessed a notable 14% growth.

Apple's strategic pivot towards subscription-based services has helped offset the decline in hardware sales, with CFO Luca Maestri expressing confidence in continued double-digit growth for services and iPads.

Anticipation mounts for Apple's imminent product releases, including the unveiling of two new iPads at a standalone event scheduled for the following week.

The absence of recent updates to the tablet line since 2022 has contributed to declining sales. 

Additionally, the introduction of the M4 chip, the latest addition to Apple Silicon, is expected at the same event. However, Apple's progress in chip development faces competition from Microsoft, set to unveil its advancements at the Build conference in late May.

While Apple does not provide specific figures for its Vision Pro headset, included in the Wearables, Home, and Accessories category, reports suggest underwhelming sales performance.

Nonetheless, CEO Tim Cook emphasized the company's enthusiasm for the launch of Apple Vision Pro and hinted at forthcoming product announcements and the WWDC event.

Responding to concerns about Apple's AI capabilities trailing behind competitors, Cook assured investors of forthcoming developments, without divulging specifics.

Reports speculate on the potential integration of AI technologies like OpenAI's ChatGPT and Google's Gemini into future iPhone models.

"I don’t want to get in front of our announcements, obviously," Cook stated during the earnings call.

"We see generative AI as a key opportunity across our products. We believe that we have advantages that set us apart there, and we’ll be talking more about it in the weeks ahead."