- Results beat expectations for fifth quarter in a row
- iPhone sales crash by 10%
- Still lacking details on how it will integrate AI
Dan Coatsworth, investment analyst at AJ Bell, comments:
“Investors speculated that Apple’s second quarter results would be rotten to the core yet revenue and earnings both exceeded expectations. That’s five quarters in a row it has beaten forecasts.
“The results give the tech giant some breathing space after the market started to question if it had lost its way. However, many of the core problems remain and it has simply bought itself some time rather than found a full solution.
“Apple has been struggling to sustain momentum with iPhone sales, particularly in China where competition has been fierce for handsets. Names like Huawei and Vivo have proved to be difficult names for Apple to beat on the battlefield.
“Apple’s laggard status with artificial intelligence has also soured sentiment around the business. Big tech companies have embraced AI and integrated it into their products and services with a ferocious hunger. The market has been desperate to know how Apple intends to deploy AI, yet a lack of solid details has stoked fears it is being left behind in the tech race.
“Even though Apple’s second quarter results were better than forecast, significant cracks are visible across the business. Three months ago, its quarterly results laid bare struggles in China, weak iPad sales, declining demand for wearables and a lacklustre period for Mac laptops. The only saving grace was a strong showing from its services arm.
“Most of these trends have continued into its second quarter apart from Mac sales having perked up, potentially helped by the launch of new models with more advanced chips.
“A 10% decline in quarterly iPhone sales year-on-year is worrying as this is Apple’s flagship product and it seems as if customers are increasingly reluctant to upgrade to a newer model. That’s a big problem because iPhones have been the bread and butter for the business, the gift that has kept giving. It cannot afford to let that position slide.
“One of the criticisms of Apple is that it has become less innovative in recent years. Apart from the Vision Pro headset, the company has opted to keep launching new iterations of existing products and there is a fear that customer fatigue is setting in. Apple built its reputation on launching devices that have revolutionised the market and it feels like we’re long overdue something new and radical.
“A product announcement is expected next week and Apple needs to pull a rabbit out of the hat. Market chatter suggests it might launch a new iPhone with a much bigger screen, a new iPad with better image quality, an enhanced Apple Pencil and a new wireless keyboard. These might deliver an improvement on what’s already in its portfolio, but that would also imply it is once again merely giving existing assets a new lick of paint.
“Next month brings Apple’s developers conference where a new version of its operating system is expected and we might finally get details on how it will integrate AI into the company’s portfolio. That could be the magic moment for the tech giant rather than the next round of product launches.”