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Weak iPhone sales due to competition and AI rollout issues

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Mac and iPad sales exceed expectations, cushioning iPhone

sales

drop

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Services business grows 13.9%, surpassing sales estimates

By Stephen Nellis

Jan 30 (Reuters) - Apple ( AAPL ) beat Wall Street's

quarterly profit estimates on Thursday, but iPhone sales and

China revenue for the holiday quarter were weak due to stiff

Chinese competition and a slow rollout of artificial

intelligence features.

The company's overall sales and profits were boosted by

stronger-than-expected sales of iPads and Macs, where new chips

helped persuade customers to upgrade.

The lack of AI selling points contributed to iPhone sales

that dropped slightly to $69.14 billion, compared with the

$71.03 billion that analysts were expecting, according to LSEG

data. Greater China sales dropped to $18.51 billion, compared

with $20.82 billion a year earlier and below the $21.33 billion

that a Visible Alpha survey of five analysts expected.

Total sales of $124.30 billion for the fiscal first quarter

ended Dec. 28 inched past Wall Street's target of $124.12

billion, according to LSEG, while earnings per share of $2.40

comfortably beat the consensus target of $2.35.

The iPhone maker has positioned AI as a set of new

capabilities and features such as drafting emails and

transcribing phone calls, but the company is rolling the

features out over time and has not yet secured a local partner

in China to release them.

In an interview, Apple ( AAPL ) CEO Tim Cook said AI features, called

Apple Intelligence, are driving sales of the company's new

devices.

"We saw that in markets where we have rolled out Apple

Intelligence, the year-over-year performance on the iPhone 16

family was stronger than those where Apple Intelligence was not

available," Cook said.

While Cook said Apple Intelligence is coming in new

languages such as French and German in April, he said there is

no timeline for when it will become available in China.

"We continue to work with the regulators and will release it as

soon as we can," Cook said.

Cook told Reuters that about half of Apple's ( AAPL ) 11% decline in

China revenues was attributable to changes in how much inventory

the company's resellers held.

IPAD, MAC SALES IMPRESS

Mac sales benefited from a new lineup of Mac Minis, iMacs and

MacBook Pros with a new M4 chip. Apple Intelligence features are

more widely available on Apple's ( AAPL ) Macs and iPads because their

larger size means they have more powerful chips.

"The silicon makes it perfect for running AI workloads, and so

I assume that that's a very key compelling reason for people to

upgrade," Cook said.

Apple's ( AAPL ) Mac and iPad sales hit $8.99 billion and $8.09 billion

respectively, above estimates of $7.96 billion and $7.32

billion, according to LSEG data.

Apple ( AAPL ) said its services business, which includes iCloud storage

and its streaming music and video services, hit $26.34 billion

in sales, up 13.9% from the previous year and above estimates of

$26.09 billion, according to LSEG data.

The firm's wearables segment, which includes the Apple Watch and

AirPods lines, had $11.75 billion in sales, compared with

analyst expectations of $12.01 billion, according to LSEG data.