iPhone sales have declined for the second consecutive quarter, indicating weak demand that investors hope to reverse with the launch of new artificial intelligence features in the fall. In the quarter ending in June, iPhone sales fell nearly 1% from a year earlier to approximately $39.3 billion.
Despite this drop, Apple's total revenue rose 5% to $85.8 billion, beating Wall Street expectations. The company has been trying to catch up with rivals in the artificial intelligence race, introducing a series of new AI tools in June. Apple has been in a race against companies such as Microsoft, Meta Platforms and Alphabet, which have invested billions in generative artificial intelligence. Investors hope these tools will encourage users to upgrade their iPhones. However, the strategies of these large companies have yet to prove lucrative in the short term.
Apple CFO Luca Maestri said that the new technology, Apple Intelligence, will be a compelling reason for customers to upgrade their devices. Apple shares were flat in after-market trading after the close following the financial results announcement. In the Greater China region, revenue fell more than 6% to $14.7 billion. China, Apple's third largest regional market, has been a concern for investors as Huawei has gained significant ground in the high-end smartphone market. According to research firm Counterpoint, iPhone sales in China fell 5.7% in the June quarter compared to a year earlier.
However, Apple's services unit, which includes revenue from the App Store and streaming services, provided relief by rising more than 14% to $24.2 billion. Despite the overall drop in iPhone sales and in China, many investors remain optimistic about Apple's prospects for the coming year. They believe the company's AI plans will spark a rebound in sales. Apple also reported that sales of iPads and Macs increased during the period.
At the June developer conference, Apple announced Apple Intelligence, a system to deeply integrate generative artificial intelligence features into its operating system and enhance the Siri voice assistant. Some advanced capabilities will be developed in collaboration with third-party AI vendors, with OpenAI's ChatGPT being the first partner. Analysts expect the new AI features to help revitalize iPhone sales, but they will only be available for the iPhone 15 Pro, the company's most premium model. Apple is expected to launch its new iPhone models in September.
The launch of these new tools has taken longer than expected. The company announced that the first batch of new AI features will not be ready for the iOS 18 release in September, but will be available in iOS 18.1, a few weeks later. Other features, such as ChatGPT integration, will not be available until later this year or even next year.
Apple expects total sales for the current quarter, which ends in September, to grow at about the same rate as in the June quarter, slightly above analyst estimates.
