Apple Earnings Preview: AI-Powered iPhone Sales Take Center Stage Amid China Market Growth

The world’s largest company, Apple, is set to release its September quarter earnings this week, with analysts projecting revenue growth spurred by strong sales in China.

Apple will report its fourth-quarter earnings for the fiscal year 2024 after the U.S. markets close on October 31.

iPhone sales remain a key metric for investors assessing Apple’s market valuation. The company’s recent iOS 18.1 update integrates artificial intelligence (AI) technology, which is expected to boost smartphone sales.

Demand in China is anticipated to rebound, serving as a crucial driver of Apple’s September quarter growth. Additionally, another significant segment, Apple’s Services business, is expected to maintain steady growth.

Josh Gilbert, Market Analyst at eToro, commented, “Apple’s intelligence features will be a focal point, and I expect plenty of commentary around that on the earnings call.”

He added, “Apple’s Services remain an integral part of the business. This segment offers high margins and has shown consistent growth.”

Apple’s stock has risen 25% this year, reaching an all-time high last week, supported by data showing a substantial rebound in iPhone sales in China from July through September.

AI-Driven iPhone Sales Could Propel Growth, Especially in China

Apple launched iOS 18.1 with its AI-powered Apple Intelligence, introducing new features like enhanced writing tools, photo editing, and notification summaries. iOS 18.1, powering the recently launched iPhone 16 series, is instrumental in boosting the latest model’s sales.

These AI-supported features are available on the iPhone 15 Pro, iPhone 15 Pro Max, and iPhone 16 models, and are anticipated to drive demand as customers upgrade their devices.

According to Bloomberg, iPhone 16 sales in China increased by 20% in the first three weeks after launch compared to its predecessor.

Data indicates consumers are increasingly opting for premium models, with Pro and Pro Max versions showing a 44% year-over-year growth.

Wedbush Securities analysts noted in a report, “iPhone 16 sales in China will show a strong rebound over the next year, marking the start of an AI-driven super cycle.” China, the world’s largest smartphone market, accounts for roughly 17% of Apple’s total revenue.

Research firm IDC reported that in the September quarter, Apple’s iPhone shipments accounted for 15.6% of the Chinese market, making it the second-largest brand after Vivo, which held an 18.6% share, with Huawei close behind at 15.3%.

Apple continues to face fierce competition from domestic smartphone makers like Huawei, Xiaomi, and Vivo.

In the June quarter, Apple lost market share in China due to intense competition and reduced consumer spending, falling out of the country’s top five smartphone sellers, while local competitors Vivo and Xiaomi saw double-digit growth.

Forecasts

According to analysts from LSEG, Apple is expected to report revenue of $94.58 billion (€87.42 billion), marking a 5.7% year-over-year increase—the largest annual growth in two years.

Earnings per share are forecasted at $1.48 (€1.37), a modest 1% increase from the previous year.

iPhone sales are expected to grow by 3.8%, with revenue from Greater China anticipated to rise by 6.6% year-over-year.

iPad revenue is projected to continue its upward trend, increasing by 10%, following a 24% surge in the previous quarter due to new model releases.

Service sales, which include revenue from the App Store, Apple Pay, Apple TV+, Apple Music, Apple Arcade, and iCloud, are expected to grow by 13%, slightly down from the 14% growth seen in the June quarter.

Apple’s Services division remains the company’s most profitable segment, contributing 25-30% of overall revenue, and is regarded as a key performance indicator in Apple’s earnings reports.

Currently, Apple’s stock is trading at $228.04, just above a support level. If the earnings report exceeds expectations, the stock could rally past the previous high of $237.49. Conversely, if results disappoint, support levels lie at $220.5 and $197.58.