Apple Inc. reported a return to revenue growth last quarter, driven by the long-awaited launch of new iPads, despite sluggish sales in China.
The company’s sales increased by 5% to $85.8 billion in the fiscal third quarter, which ended on June 29, surpassing analysts’ expectations of $84.5 billion. Just three months earlier, Chief Financial Officer Luca Maestri had forecasted low single-digit percentage growth for the period.
These positive results provide a boost of momentum for Apple as it prepares for its next iPhone release in September. The tech giant is banking on a new suite of AI features, dubbed Apple Intelligence, to stimulate demand for its latest devices.
Following the earnings report, Apple’s shares saw a modest rise of less than 1% in late trading. They had already increased by 13% this year, fueled by investor optimism that the new AI technology would drive sales.
Earnings for the quarter reached $1.40 per share, exceeding the $1.35 predicted by analysts. The third quarter is typically one of Apple’s slowest, as many customers hold off on purchases while awaiting the next iPhone’s fall release.
Both revenue and profit set records for a June quarter, although China remained a weak spot, with sales in the region dropping 6.5% to $14.7 billion, missing the $15.3 billion forecast by analysts.
Sales of Apple’s flagship iPhone came in at $39.3 billion, slightly down from the previous year but still above Wall Street expectations. The company had declined to provide a forecast for iPhone revenue for the June period, reflecting uncertainty in the smartphone market.
Apple’s iPad business saw a significant boost from the release of new models, which included a higher-end iPad Pro with an M4 chip and a faster iPad Air with a larger screen option. Revenue from this category rose 24% to $7.16 billion, surpassing the $6.6 billion estimate. The company had anticipated double-digit percentage growth for the iPad in the June period, a target it easily met. Many customers and educational institutions had delayed purchases in anticipation of the new models.
In addition to the new iPad Pro and iPad Air, Apple is also developing upgraded versions of its entry-level iPad and iPad mini, which are expected to further drive upgrades when released in the coming months.
Last quarter, Apple also introduced Apple Intelligence, showcasing new AI features at its developers conference in June. However, these features, intended for the iPhone, iPad, and Mac, aren’t expected to be available to customers until October. Apple has yet to clarify how it plans to monetize these features, aside from boosting demand for compatible devices.
“We are very much looking forward to sharing these tools with our users, and we continue to invest significantly in the innovations that will enrich our customers’ lives,” Chief Executive Officer Tim Cook stated.
The services segment, including the App Store, Apple Music, and the TV streaming platform, continues to be a key growth driver, generating $24.2 billion in sales last quarter, up 14%. This exceeded Wall Street’s expectation of just under $24 billion. However, this segment faces scrutiny from regulators who view the App Store as an anticompetitive force in the industry, potentially limiting Apple’s ability to collect revenue from subscriptions and app downloads.
