New iPhone and record services sales help Apple return to growth

Apple has returned to growth and ­beaten analysts’ forecasts with a 2 per cent rise in sales to $119.6 billion in the first quarter of the year, buoyed by the introduction of a new iPhone model and record revenue in its services division.

The closely watched iPhone sales figures rose to $69.7 billion, up from $65.7 billion the year before, while services revenue hit $23 billion, up from $20.7 billion, which includes the commission that Apple takes from sales through its App Store, cloud services and a share of advertising search revenue.

However, despite the advances, ­investors were concerned about falling sales and increased competition in China and in late trading on Wall Street the group’s shares fell by $3.23, or 1.7 per cent, to $183.41, valuing Apple at $2.9 trillion, down from last week’s $3 trillion.

Tim Cook, Apple’s chief executive, looking ahead to sales of the company’s new virtual reality headset, said: “We are pleased to announce that our installed base of ­active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic ­segments. And as customers begin to experience the incredible Apple Vision Pro tomorrow, we are committed as ­ever to the pursuit of groundbreaking innovation — in line with our values and on behalf of our customers.”

Apple has had four quarters in a row of negative revenue growth. Consensus estimates for this quarter had been for ­revenue of $118 billion and net income of $32.7 billion. They had anticipated iPhone sales up 2.8 per cent to $67.7 billion, with services up 12.3 per cent to $23.3 billion.

At the end of last year, ahead of the critical Christmas period, Apple missed Wall Street expectations as sales of products such as iPads and wearable devices were weaker than expected.

Overall in 2023, Apple reported its first drop in full-year revenue since 2019, with sales down by 6 per cent to $298 billion. It has been the worst-performing of the Big Tech companies in recent months, losing its $3 trillion valuation this week.

Apple was founded in 1976 by Steve Jobs and has been headed by Tim Cook since 2011. Based in Cupertino, California, it recently overtook its bitter rival Samsung as the world’s biggest smartphone seller by volume and in 2023, according to IDC which tracks sales, Apple captured the top spot in the Chinese smartphone market for the first time.

While other technology companies have been vocal about their advances in artificial intelligence, Apple has kept much quieter about how it is building up its AI capability and what its plans are to bring the tech to a new generation of phones.

Thomas Husson, principal analyst at Forrester, said: “Looking forward, the biggest question mark is Apple’s ability to leverage AI and genAI in differentiating experiences. Following the buzz of Samsung’s Galaxy AI launch, Apple is no doubt actively working behind the scenes and will share announcements at its… developer conference in June.”

Away from phones, the company is releasing its Vision Pro headset to US consumers today, its most significant product launch in many years. Despite the high price of the “mixed reality” headset, which starts at $3,500, more expensive than the Meta Quest priced from $500, the early indications for consumer demand are positive.

Husson was bullish about the launch: “Given the high price point, the thousands of pre-orders mean hundreds of millions of dollars — not bad for an entirely new product category still in its infancy.”