By Akash Sriram
(Reuters) – Apple is expected to report tepid quarterly revenue growth on Thursday as its slow roll-out of artificial intelligence features and tough Chinese competition weighed on iPhone demand during the crucial holiday-shopping season.
The company and its rivals Google and Samsung have been leaning on AI to drive sales of their devices. But Apple’s latest iPhone 16 series lacked such features at launch in September and some of its AI services, including an improved Siri, are only expected later this year in some regions.
Apple’s challenges with AI were highlighted this month when it had to pull a news-summarizing AI tool due to inaccurate headlines, which drew criticism from the BBC and other news outlets.
“AI is the new technology innovation, the fact that Apple’s handsets are lagging behind on capabilities is a key reason why their competitive positioning has weakened and the company has lost market share,” said Jane Hepburne Scott, investment manager at Aegon Asset Management, which owns Apple shares.
Under pressure from a resurgent Huawei as well as other Chinese smartphone makers, Apple saw its share of the global smartphone market narrow to 23% in the final three months of 2024 from almost 25% a year earlier, according to IDC data.
The decline was steeper in China – its third-largest market – where Apple’s share fell by 10 percentage points to 17%, the data showed.
Although the Chinese government has been offering subsidies to smartphone purchasers to boost domestic consumption, these subsidies target low- to mid-tier phones priced below $800, excluding high-end iPhones, Barclays analysts said in a note.
Worries about iPhone demand have weighed on Apple shares this year, dragging them 5% lower so far in January.
Analysts expect the company to post revenue growth of 3.8% for the three months to December, Apple’s first fiscal quarter, according to data from LSEG. That is well below the 6.1% growth the company posted in the September quarter, which included only a few days of new iPhone sales.
Sales of iPhone will likely tick up 1.9% in the first quarter, weaker than the 5.5% increase in the previous quarter.
Mac sales are expected to rise 2.3%, slightly faster compared with the previous three months, while iPad revenue is expected to increase by 4.2%, a slower pace than the fourth quarter.
The services business, which has in recent years outpaced growth in Apple’s devices, is expected to post an increase of 12.9% in sales.
Like other companies with a large global presence, Apple is also set to be hit by a stronger dollar. The U.S. dollar strengthened by nearly 8% in the final three months of 2024 amid expectations for trade tariffs from President Donald Trump.
“With more than 50% of sales coming from outside of the Americas, the strengthening U.S. dollar against the euro and yen in the December quarter could make it more difficult for Apple to report sales that are above consensus estimates,” warned Tom Forte, senior consumer internet analyst at Maxim Group.
(Reporting by Akash Sriram and Rishi Kant in Bengaluru; Editing by Aditya Soni and Saumyadeb Chakrabarty)
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