Apple's Q3 Rebound: iPhone Recovery and AI Push Boost Outlook
Apple anticipates revenue growth in Q3, with improved iPhone sales in China and strong iPad performance. The tech giant's AI plans and services growth paint a positive picture despite regulatory challenges.
Apple is poised to announce a return to revenue growth in its fiscal third quarter, marking a significant turnaround for the tech giant. The company's performance has been bolstered by improved iPhone sales in China and strong iPad demand, driven by recent design updates.
iPhone sales, which constitute nearly half of Apple's revenue, are expected to show a modest 2.2% decline in the quarter ending June 2024. This represents a substantial improvement from the 10.5% drop observed in the previous quarter. Analysts suggest that this trend indicates a potential resurgence for the iPhone.
In May 2024, Apple implemented substantial discounts on select iPhone models in China, offering up to 2,300 yuan ($317) off. This strategic move helped narrow the sales decline in the region to 3.1% in the April-June quarter, a significant improvement from the 6.6% decrease seen in the first three months of the year.
The company's focus on artificial intelligence (AI) has also contributed to its positive outlook. In June 2024, Apple announced plans to integrate AI features across its devices, including the incorporation of OpenAI's ChatGPT and the introduction of "Apple Intelligence" technology to enhance its app suite.
iPad sales are projected to have increased by 14.1%, the fastest growth since the holiday quarter of 2022. This surge is attributed to the launch of a new AI-focused iPad Pro and a larger iPad Air in May 2024, revitalizing a product line that had experienced stagnation for the past two years.
Apple's services business, encompassing the App Store and subscription services like Apple TV and Music, is expected to have grown by 13.2%. This segment now accounts for more than a quarter of the company's revenue, outperforming its hardware business in recent years.
"The company's fate is turning around in the region. Apple's AI plans should appeal to customers in the feature-sensitive market."
However, the services division faces regulatory challenges, particularly in the European Union, where antitrust regulators have accused the App Store of breaching the Digital Markets Act.
As Apple prepares to release its fiscal third-quarter results on Thursday, August 3, 2024, investors and analysts alike are anticipating a positive report that could further solidify the company's position as a market leader in the tech industry.
