Apple’s Profit Projections Excite Investors Amidst Dipping China Sales

Apple has given reassuring revenue forecasts for quarter one after reporting a 7.1% increase in quarter four net income. The company’s positive outlook helped to boost Apple’s investor confidence after analysts projected slow sales in the holiday quarter, Yahoo Finance reported.

Apple stocks gained over 3% on January 31 as the company hinted at a recovery from iPhone sales drop as the company rolled out AI features.

“With investors highly tuned into how AI spend will represent real revenue for big tech, Apple’s results have provided reassurance,” Hargreaves Lansdown Head of Money and Markets Susannah Streeter said.

The China Effect

Apple sales results showed that the company’s revenue grew despite missed iPhone sales estimates. China Apple sales declined by 11.1%, reducing the company’s revenue to $18.51 billion. This was the largest sales drop that Apple has recorded in a major region since quarter one of 2024 when sales dipped by 13%.

The Chinese market is increasingly proving difficult for the iPhone maker. The big tech is facing intense competition it continues to face from local smartphone manufacturers like Huawei, Vivo, and Oppo. Apple CEO Tim Cook has blamed the sales drop on delays in making Apple Intelligence available in the Chinese market and several other major markets. Apple AI is the biggest selling for Apple’s latest iPhone 16 series that the company launched towards the end of 2024.

“During the December quarter, we saw that in markets where we had rolled out Apple intelligence, that the year-over-year performance on the iPhone 16 family was stronger than those markets where we had not rolled out Apple intelligence,” Cook said.

Inventory Challenges

Besides fierce competition, Cook attributed the drop in China iPhone sales to inventory issues.

“Our channel inventory reduced from the beginning of the quarter to the end of the quarter. “Our sales were a bit higher than we forecasted them to be toward the end of the quarter. And so we ended up a little leaner than we had expected to,” he said during the earnings call.

Security restrictions and regulatory approval are the other challenges that have kept Apple from rolling out Apple AI in China. The tech company has reportedly partnered with internet firm Baidu to include AI features to iPhones in the Asian country.

Apple’s quarter-one projections fall within analyst predictions of about 5%. The positive projections were sufficient to excite investors after a quarterly report that spurred mixed emotions. The rise in the company’s stocks was a relief for investors after the 5.1% drop experienced until January 30 following the widespread tech share decline.

Minimal Gains

The drop in iPhone sales in quarter four suggests that Apple did not reap much from unveiling Apple Intelligence. Cook argued that the company recorded better iPhone 16 sales in countries where users have access to AI features. The company entered the AI race later compared to rivals and has been playing catch-up with some of its biggest peers.

The iPhone maker opted for a staggered AI rollout, a move that analysts have argued made customers wait for many features. As Apple adopted this approach, its competitors dived in and expanded to other areas, including smart glasses.

“Apple needs to accelerate its Apple Intelligence deployment and be a bit more aggressive in emerging areas like smart glasses development to maintain an innovative edge. The next few quarters will test whether it can balance its cautious approach with the market’s hunger for AI innovation,” Jacob Bourne, an Analyst at Emarketer said.

Apple also reported a decline in its wearable business in the holiday quarter as well. Overall, Apple’s revenue increased by 4% to reach the $124.3 billion mark in the quarter under review against a $124.1 billion analyst projection. The company reported a $2.40 profit rise per share against the $2.35 projected by analysts.