Apple Earnings Beat Forecasts, Easing Wall Street Concerns
Following Apple's (AAPL) release of first-quarter earnings, Wall Street analysts expressed relief as the company outperformed expectations and addressed declining iPhone sales in China.
Apple reported earnings per share of $2.40 on revenue of $124.3 billion, exceeding analysts' estimates of $2.35 EPS and $124.1 billion in revenue. Despite this, iPhone revenue in China fell by 11% year-over-year, with overall China sales declining more than anticipated.
However, Apple CEO Tim Cook attributed this decline to a strategic reduction in shipments to Greater China suppliers, indicating that it did not primarily reflect reduced demand. Cook also highlighted that iPhone Intelligence contributed to a record number of upgrades, suggesting that sales in China could improve when AI features receive government approval.
Analysts from JPMorgan and Citi maintained a Buy rating for Apple, citing the better-than-expected results and the potential for AI features to drive growth.
Regarding the concerns about AI expenditure raised by a Chinese AI model, Cook emphasized Apple's prudent approach to capital allocation, which has contributed to its strong financial position.
Despite Apple being perceived as lagging behind in the AI race, analysts believe the company's strong ecosystem, hardware capabilities, and focus on privacy make it well-positioned to capitalize on on-device AI advancements.
Apple shares experienced a 3% gain in early trading following the earnings release. Jefferies analyst Edison Lee expressed skepticism about the growth potential of AI services, but most Wall Street analysts remain bullish on the stock.