Apple beat Wall Street’s sales and profit expectations in its fiscal fourth quarter (third on the calendar), thanks to early sales of the iPhone 16, a set of phones designed for new AI features that went on sale near the end of the quarter.
The company’s total sales grew 6% to $94.93 billion, exceeding Wall Street targets of $94.58 billion, according to LSEG.
However, Apple’s net profits fell 36% to $14.736 billion.
The profit of $1.64 per share, excluding a huge one-time tax charge in the European Union, beat analysts’ expectations of $1.60 per share.
Sales of the iPhone, the company’s main product, increased 5.5%, to $46.22 billion, compared to the $45.47 billion expected by analysts. Other product lines did not meet expectations.
Apple’s fourth quarter ended on September 28, meaning it reflects only a few days of sales of its iPhone 16 series that went on sale on September 20.
The company’s shares fell 2%, to $221.3, in trading after the market closed and once the results were known.
Read: Apple sees the largest revenue increase in two years after demand for the iPhone 16 in China
Apple Chief Executive Tim Cook told Reuters that sales of the iPhone 16 grew faster than those of the iPhone 15 a year earlier, with both phones on sale for the same number of days in the fourth quarter.
He also said that Apple customers are downloading a new version of its iPhone operating system, with what it calls Apple Intelligence features, at twice the rate of the previous year.
“We’ve already received great feedback from customers and developers,” Cook said. “We are off to a good start.”
Investors will be watching a conference call at 2100 GMT in which Apple executives will outline expectations for the fiscal first quarter, covering holiday sales in the United States, Europe and several other markets.
The rollout of Apple’s artificial intelligence strategy, which it revealed this year, depends on how well its new phones sell.
Rather than introducing AI into a standalone app or service, Apple has spread AI across its latest operating systems in the form of new features, such as the ability to help rewrite an email in a more professional tone.
The features will be available primarily on the iPhone 16 models, which have more powerful computing chips, although the pro versions of the iPhone 15 are powered by Apple Intelligence.
Apple’s rivals Microsoft and Meta said this week that they expect to continue increasing spending to support their artificial intelligence strategies. Apple said payments for property and equipment – a measure of its capital spending – rose $2.91 billion from the previous quarter to $9.45 billion.
Apple’s lower spending is partly because it uses third-party data centers for some AI work. Some aspects of Apple Intelligence are based in Apple’s own data centers, but the company is using its own internal chips to power those features.
Read: iPhone 16 sales blocked in Indonesia due to local parts regulations
“There would be some financial benefit to us using our own silicon, obviously, but that’s not the reason we’re doing it. We do this because we can offer the same level of privacy and security as on devices,” Cook said.
Sales in Apple’s services business, which includes iCloud storage and Apple Music, were $24.97 billion, compared to analyst expectations of $25.28 billion, according to LSEG.
Mac and iPad sales were $7.74 billion and $6.95 billion, respectively, versus estimates of $7.82 billion and $7.09 billion, according to LSEG data.
Sales in Apple’s home and wearables business, which includes its Apple Watch and AirPods devices, were $9.04 billion, compared to estimates of $9.2 billion, according to LSEG.
With information from Reuters
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