Apple sales drop, Tim Cook sees return to growth amid AI investment

Apple on Thursday reported a shallower than expected decline in quarterly revenue, and Chief Executive Tim Cook told Reuters the company expects a return to sales growth in the current quarter as it invests in AI features to be unveiled in the coming months.

Apple said fiscal second-quarter revenue fell 4% to $90.8 billion, beating the average analyst estimate of $90.01 billion, according to LSEG data.

For Apple’s current quarter, which ends in June, Cook told Reuters the iPhone maker expects “to grow low-single digits” in overall revenue.

Wall Street expects 1.33% revenue growth to $82.89 billion, according to LSEG data.

Apple faces a raft of challenges across its business.

Smartphone rivals such as Samsung Electronics have introduced competing devices aimed at hosting artificial-intelligence chatbots.

On the regulatory front, Apple’s services business, which contains its lucrative App Store and was one of the few areas of growth in the fiscal second quarter, is under pressure from a new law in Europe.

In the United States, the Department of Justice in March accused Apple of monopolizing the smartphone market and driving up prices.

For the fiscal second quarter, IPhone sales fell 10.5% to $45.96 billion, compared with analyst expectations of $46 billion.

Apple executives said in February that the year-ago fiscal second quarter had benefited from a $5 billion surge in iPhone sales as the company caught up from supply-chain snarls during pandemic lockdowns.

Excluding that one-time phenomenon, iPhone sales were down only slightly as the Cupertino, Calif., company’s signature product faces stiff competition.

In China, Huawei Technology has gained market share.

Cook said that iPhone sales still experienced “growth in some markets, including China.”

But Apple’s revenue decline in China was not as steep as analysts expected, with Greater China sales of $16.37 billion for the fiscal second quarter that ended March 30, down 8.1% and above analyst expectations of $15.59 billion, according to data from Visible Alpha.

Apple has said little about its product plans for artificial intelligence, the technology on which rivals Microsoft and Alphabet’s Google are placing huge bets.

The company started ramping up research and development spending last year, and Cook said the company has spent more than $100 billion on R&D in the past five years.

“We continue to feel very bullish about our opportunity in generative AI and we’re making significant investments,” he said. “We’re looking forward to sharing some very exciting things with our customers” at events later this year, Cook said.

Apple’s quarterly earnings per share were $1.53, above Wall Street estimates of $1.50, according to LSEG data.