Apple set for big sales decline as investors await AI in iPhones
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[May 01, 2024] By
Yuvraj Malik
(Reuters) - Apple's plan to add generative AI to its iPhones and revive
sagging sales in the crucial Chinese market will be in focus on
Thursday, when the tech giant is expected to report its biggest
quarterly revenue decline in more than a year.
Long considered a must-own stock on Wall Street, Apple shares have
underperformed other Big Tech companies in recent months, falling more
than 10% year to date as fears mount about its slow roll out of AI
services and as a resurgent Huawei takes market share in China.
Analysts on average see iPhone sales, which account for about half of
Apple's revenue, falling 10.4% in the first three months of 2024,
according to LSEG. That drop would be the steepest in more than three
years.
Analysts estimate Apple's total revenue declined 5% in its second
quarter, which included January through March. That would be Apple's
biggest revenue decline since the December-quarter of 2022, when revenue
fell 5.5%.
Apple earlier this year lost the crown of the world's most valuable
company to Microsoft and its market value now stands at $2.68 trillion
after the decline in its share price in 2024.
Weak revenue and falling shares have put pressure on Apple to spruce up
its flagship device after years without major upgrades.

The company is in talks with OpenAI and Alphabet-owned Google to add
genAI features for the iPhone that could be unveiled at what is expected
to be its biggest-ever annual developer conference in June, Bloomberg
News has reported.
Analysts believe such an AI integration could drive demand for the next
iPhone series, expected to be announced in the fall.
While executives at Microsoft, Alphabet, Meta Platforms and other major
technology firms have talked up their AI strategies on quarterly
conference calls in recent months, Apple CEO Tim Cook has discussed his
plans for the emerging technology much less.
Adding AI features to iPhones could also help Apple to compete better
with Huawei and Samsung Electronics, which reclaimed the title of the
world's top smartphone vendor from Apple earlier this year, driven by
demand for the AI features in its Galaxy S24 smartphones.
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People look at the new iPhone 15 as Apple's new iPhone 15 officially
goes on sale across China, at an Apple store in Shanghai, China
September 22, 2023. REUTERS/Aly Song/File Photo

"Replacement cycle tailwinds and incremental generative AI features
set up Apple well for a strong iPhone 16 cycle," Bernstein analyst
Toni Sacconaghi said this week, upgrading his rating on the
company's shares to "outperform" from "market-perform".
"We believe prevailing weakness in China is more cyclical than
structural, and note historically Apple's China business has
exhibited much higher volatility than Apple overall, given its very
feature-sensitive installed base."
Thursday's earnings will also be watched closely for updates on the
company's stock buyback plan and the Vision Pro, Apple's first major
product in years that hit the shelves in February.
After initial enthusiasm, there have been signs that demand slowed
for the $3,500 device, with an analyst saying this month that Apple
has pulled back its production estimates for the mixed-reality
headset.
The rest of the company's hardware business is also reeling from
soft demand, with iPads and Mac sales expected to fall 11.4% and
4.3%, respectively, in the March quarter.
Apple has signaled it is sharpening its focus on the devices, which
have also been hobbled by a lack of major upgrades.
The company is hosting an event later this month where a revamped
iPad line-up is expected to be unveiled and media reports have said
that it plans to update every Mac model with faster, AI-focused M4
processors.
The services business - which includes money earned from App Store
and subscription services such as Apple TV - is expected to remain a
bright spot with revenue growth of 7.7%.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Shounak
Dasgupta)
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