Written by Yuvraj Malik
(Reuters) – Apple's plan to add generative AI to the iPhone and revive sluggish sales in the key Chinese market will be in the spotlight on Thursday. Today, the tech giant is expected to report its biggest quarterly revenue decline in more than a year.
Apple stock, long considered a stock to own on Wall Street, has underperformed other Big Tech companies in recent months, raising concerns about the slow rollout of artificial intelligence services and sparking a resurgence. It has fallen more than 10% this year as Wei takes over the market. Share in China.
Analysts on average expect iPhone sales, which account for about half of Apple's sales, to decline 10.4% in the first three months of 2024, according to LSEG. This is the largest decline in more than three years.
Apple's iPhone sales were unusually high last year, based on a 10.4% decline in iPhone sales, as Apple filled pent-up demand after the coronavirus pandemic, company executives have previously noted.
At least $5 billion of iPhone sales of $51.3 billion a year ago had essentially been recouped from disruptions in the December 2022 quarter, when coronavirus lockdowns in China hampered iPhone production. , executives said.
Even taking that into account, Wall Street expects iPhone sales to decline slightly, with analysts estimating a 5% decline in Apple's total revenue for the fiscal second quarter that ended in March. There is. This is Apple's biggest decline in revenue since the fiscal year ended December 2022, when sales fell 5.5%.
Apple lost its title as the world's most valuable company to Microsoft earlier this year. The stock has declined 11.24% since the beginning of the year, giving the company a market value of $2.68 trillion.
Sluggish sales and a falling stock price are putting pressure on Apple to refresh its flagship devices after years without major upgrades.
The company is in talks with OpenAI and Alphabet's Google to add genAI capabilities to the iPhone, which could be announced at June's annual developer conference, expected to be the largest in history. Bloomberg News reported.
Analysts believe that such AI integration could increase demand for the next iPhone series, which is expected to be announced in the fall.
Executives at major technology companies, including Microsoft, Alphabet and Metaplatforms, have been talking about their AI strategies on quarterly conference calls in recent months, but Apple CEO Tim Cook has spoken out about his own thoughts on the emerging technology. He didn't say much about his plans.
Adding AI capabilities to the iPhone could also help Apple better compete with Huawei and Samsung Electronics. Samsung Electronics took over the world's top smartphone vendor position from Apple this year, driven by demand for AI features in its Galaxy S24 smartphone.
Bernstein analyst Toni Sacconaghi this week upgraded the company's stock from “market perform” to “outperform,” writing, “Apple is poised for strong iPhone 16 performance due to replacement cycle tailwinds and incremental generative AI capabilities.” We are well on our way to a new cycle.”
“We believe the prevailing weaknesses in China are cyclical rather than structural, given the installed base, which has historically been very sensitive to capabilities. Note that Apple's China operations have shown much higher volatility than Apple as a whole.
Thursday's results will also be closely watched for updates on the company's stock buyback plan and the Vision Pro, Apple's first major product in years, which hit store shelves in February.
After initial enthusiasm, there are signs that demand for the $3,500 device is slowing, with analysts saying this month that Apple withdrew production forecasts for its mixed reality headset.
The rest of the company's hardware business is also weak due to weak demand, with iPad and Mac sales expected to decline 11.4% and 4.3%, respectively, in the March quarter.
Apple has signaled that it is increasing its focus on these devices, but this is also hampered by a lack of major upgrades.
Apple is set to unveil a refreshed iPad lineup at an event this month, with media reports saying all Mac models will be updated with faster, AI-focused M4 processors.
The Services business, which includes subscription services such as the App Store and Apple TV, continues to have a positive outlook, with sales increasing 7.7%.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Shonak Dasgupta and Richard Chan)
