((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Yuvraj Malik
Apple AAPL.O’s plan to add generative AI to its iPhones and revive flagging sales in the crucial Chinese market will be in focus on Thursday, when the tech giant is expected to announce its strongest decline in quarterly turnover for more than a year.
Long considered a must-have stock on Wall Street, Apple stock has underperformed other big tech companies in recent months, falling more than 10% since the start of the year as fears mount over the slow deployment of its artificial intelligence services and that Huawei HWT.UL, in full resurgence, is taking market share in China.
Analysts on average forecast that iPhone sales, which account for about half of Apple’s revenue, will fall 10.4% in the first three months of 2024, according to LSEG. This drop would be the largest in more than three years.
Analysts estimate that Apple’s total revenue fell 5% during the second quarter, which runs from January to March. This would be Apple’s largest revenue decline since the December 2022 quarter, in which revenue fell 5.5%.
Apple lost its crown as the world’s most valuable company to Microsoft MSFT.O earlier this year and its market value now stands at $2.68 trillion After its share price fell in 2024.
Weak revenue and falling shares have put pressure on Apple to improve its flagship device after years without major updates.
The company is in talks with OpenAI and Alphabet-owned Google to add generic AI features to the iPhone, which could be unveiled at what is expected to be its biggest annual developers conference in June, a reported Bloomberg News.
Analysts believe that such AI integration could boost demand for the next iPhone series, which is expected to be announced in the fall.
As executives from Microsoft, Alphabet GOOGL.O , Meta Platforms META.O and other big tech companies have discussed their AI strategies in quarterly conference calls in recent months, Chief Executive Officer Tim Cook of Apple, has spoken much less about its plans regarding this emerging technology.
Adding AI features to iPhones could also help Apple better compete with Huawei and Samsung Electronics
005930.KS , which took over the title of the world’s top smartphone seller from Apple earlier this year, thanks to demand for AI features in its Galaxy S24 smartphones.
analyst Toni Sacconaghi of Bernstein said this week: “Replacement cycle headwinds and additional AI generative features prepare Apple for a strong iPhone 16 cycle,” raising his rating on the company’s shares from “market-performing” to “outperforming”.
“We believe the current weakness in China is more cyclical than structural, and we note that historically Apple’s business in China has shown much higher volatility than Apple’s business in general, given that its base installed is very sensitive to functionalities
Thursday’s results will also be closely watched for updates on the company’s stock buyback plan and the Vision Pro, Apple’s first major product in years, which hit the market in February .
After the initial enthusiasm, there were signs of slowing demand for the $3,500 device, with one analyst saying this month that Apple had lowered its production estimates for the headset. mixed reality.
The rest of the company’s hardware business is also suffering from weak demand, with sales of iPads and Macs expected to fall 11.4% and 4.3%, respectively, in the March quarter.
Apple said it was focusing more on its devices, which have also suffered from a lack of major updates.
The company is holding an event later this month where it is expected to unveil a revamped iPad lineup, and media reports have reported that it plans to update all Mac models with faster, focused M4 processors. on artificial intelligence.
The services sector – which includes money made through the App Store and subscription services such as Apple TV – is expected to remain a bright spot with revenue growth of 7.7%.
