Apple Surprises with Earnings but Faces AI Skepticism
Even though Apple surpassed expectations with its latest earnings report and provided optimistic guidance, its stock barely moved. Investors are looking for tangible proof that artificial intelligence will significantly contribute to future growth.
For the first fiscal quarter, Apple reported revenues of $143.76 billion, exceeding Wall Street’s predictions of $138.42 billion. Earnings also surpassed expectations, coming in at $2.84 per share compared to the anticipated $2.66, according to Benzinga Pro.
Sales saw a year-over-year increase of 16%, while profits grew by 19%.
The company forecasted robust growth for the March quarter, predicting sales increases between 13% to 16% and a gross margin of 48% to 49%. Yet, Apple shares only rose slightly—less than 1%—in after-hours trading.
Gene Munster from Deepwater Asset Management pointed out that the tepid market reaction likely stems from investor skepticism regarding Apple’s artificial intelligence strategy, rather than dissatisfaction with its financial results.
“I think it’s pretty straightforward: investors want more clarity on how AI will significantly affect their business,” said Munster in comments following the earnings call.
He mentioned that while Apple’s numbers indicate customer contentment and ongoing device upgrades, investors need clearer milestones and timelines related to AI initiatives to be fully convinced.
This concern appears to have roots in earlier high expectations for AI to drive a resurgence in growth by mid-2024. Munster noted that the company has since fallen short of those expectations, creating a credibility gap that isn’t typical for Apple.
“That kind of miss feels un-Apple-like,” he remarked, indicating that Apple has adopted a more subdued approach under CEO Tim Cook.
During the earnings call, Cook offered a limited update on AI, stating only that improvements had been made, particularly with Siri. An Apple Intelligence-powered feature is expected to launch “this year,” but no further details were provided.
On a positive note, Munster highlighted a significant revenue rebound in China, which grew 38% year over year, along with the continued expansion of Apple’s installed base, which now exceeds 2.5 billion active devices.
