Go figure. Apple reports flat sales for Q4 on its flagship product and Wall St. applauds. But that’s what happened Thursday (Jan. 30) as the company reported record overall revenue and a positive impact so far on iPhone sales from Apple Intelligence.
By the numbers, Apple reported a 4% year-over-year increase to $124.3 billion, alongside record earnings per share (EPS) of $2.40, a 10% jump year over year. iPhone revenue reached $69.1 billion, with all-time revenue records in numerous markets and regions but a weak performance in the Chinese market. The quarter is the first to include iPhone 16 sales, and Apple released its Apple Intelligence AI suite for the devices during the quarter. CEO Tim Cook stressed that the iPhone 16 models performed stronger in markets where Apple Intelligence features were available. They’re not available in China. Overall, China’s sales declined 11.1% during the quarter to $18.51 billion, the largest drop in China’s sales since the same quarter in 2024 last year when they fell 12.9%.
“We did see that the markets where we had rolled out Apple Intelligence, that the year-over-year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available,” Cook told the company’s earnings call. This indicates, he said, that the new AI capabilities, including features like writing tools, Image Playground, Genmoji, and Visual Intelligence, are driving customer demand.
Apple reported a record for iPhone upgraders during the quarter, with the iPhone 16 family outperforming the iPhone 15 family since launch. Cook said this indicates a strong desire among existing customers to adopt the latest technology, with Apple Intelligence being a key factor. The company’s installed base of active devices also reached a new record of 2.35 billion.
Services Sector Up
All of this led to Apple’s services sector continuing to be a major growth driver, achieving a record $26.3 billion in revenue, a 14% increase year-over-year. The services sector includes subscriptions, warranties, and licensing deals and accounted for a reported $23.12 billion in revenue, 14% higher than the same period last year. Cook said the company had over 1 billion subscriptions, including direct subscriptions for services like Apple TV+ and iCloud and subscriptions to third-party apps through the company’s App Store system. The company saw records in the Americas, Europe, and the rest of Asia Pacific, with a December quarter record in Japan. The services business has seen nearly $100 billion in revenue in the past year. Paid subscriptions also grew at a double-digit pace. Increased customer engagement with service offerings, Cook said, is a key factor driving growth.
Other key points on the company’s product roster included overall Mac revenue, up 16% year over year to $9 billion, driven by the new M4 chip and broad-based strength across its product line. iPad revenue rose by 15% year over year to $8.1 billion, with more than half of the buyers new to the product. Wearables, home and accessories revenue was down 2% year over year at $11.7 billion. However, the Apple Watch installed base hit a new all-time high.
Lower-cost AI?
The call was absent talk about AI-based capital expenditures. When asked about the perception that Apple is a big beneficiary of lower costs of compute given the rise of Chinese AI startup DeepSeek, Cook responded that, “In general, I think innovation that drives efficiency is a good thing. And that’s what you see in that model.” He also highlighted Apple’s integration of silicon chips and software and its hybrid model as continuing to serve the company well.
Looking ahead, Cook emphasized his belief in the mainstream adoption of Apple Intelligence and said, “I think I know from my own personal experience once you start using the features, you can’t imagine not using them anymore.” He noted that the user base will continue to grow with the rollout of new languages in April, as well as the increasing number of users with iPhone 15 Pro and iPhone 16 models, which are required to use Apple Intelligence.
