Apple has forecast a sales slump will continue into the current quarter, as the tech giant makes a massive investment in artificial intelligence research and development.
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Apple shares dropped about 2 per cent after the company predicted what could be the fourth quarter in a row of declining sales. Weaker than expected sales of Apple's most famous device, the iPhone, underwhelmed investors. Executives said iPhone sales would improve in the fourth quarter, but did not say how much.
Apple is in a delicate position, with its next big product - the Vision Pro mixed-reality headset announced in June - not yet in the hands of consumers.
Apple said sales for the fiscal third quarter ending July 1 fell 1.4 per cent to $81.8 billion and earnings per share rose 5 per cent to $1.26. That topped analyst expectations of $81.69 billion and $1.19 per share, according to IBES data from Refinitiv. Weaker iPhone sales were balanced by strong sales in the services segment that contains Apple TV+ and by sales in China that grew 8 per cent year over year.
Apple's research and development spending hit $22.61 billion for the fiscal year so far, about $3.12 billion higher than at this point in the previous year.
Apple chief executive officer Tim Cook told Reuters that the increased R&D spending was in part driven by work on generative artificial intelligence, the same field that is driving spending at other big technology companies.
"We've been doing research across a wide range of AI technologies, including generative AI, for years. We're going to continue investing and innovating and responsibly advancing our products with these technologies to help enrich people's lives," Cook said. "Obviously, we're investing a lot, and it is showing up in the R&D spending that you're looking at."
"The company continues to face headwinds caused by waning growth in the smartphone market," said Insider Intelligence analyst Jeremy Goldman. "All eyes are now on its earnings call for any potential Vision Pro or AI-related announcements that could further push the boundaries of their business model."
Apple's services segment, which includes its Apple TV+ service which has announced a deal to carry Major League Soccer, had $21.21 billion in revenue, compared with analyst estimates of $20.76 billion, according to Refinitiv data.
Cook said Apple now has 1 billion subscribers on its platform, which includes both Apple services and third-party apps, up from 975 million a quarter ago.
The company's wearables business, which includes the Apple Watch and AirPods, had revenue of $8.28 billion, compared with analyst estimates of $8.39 billion, according to Refinitiv data.
Mac and iPad sales were $6.84 billion and $5.79 billion, respectively, compared with analyst estimates of $6.62 billion and $6.41 billion, according to Refinitiv data. "Almost half of the Mac buyers during the quarter were new to the product, and we continue to see strong upgrader activity to Apple Silicon," Cook told Reuters.
Australian Associated Press
