Apple reported solid revenue growth in the past quarter as the tech group offered a bullish outlook on how new artificial intelligence features would drive an uptick in hardware sales in the holiday season.
The iPhone maker’s revenue rose 6% from a year ago to US$94.9 billion ($158.7b) for the quarter to September 28, slightly above consensus estimates of US$94.4b.
Diluted earnings per share were US97¢ after the company took a one-time US$10.2b tax charge in connection with an EU ruling earlier this year.
Net income was US$14.7b compared with the US$24.3b estimated by analysts absent the charge.
In September a long-running legal dispute with the EU over the company’s Irish tax affairs resulted in a victory for the regulator when the bloc’s top court ruled Apple must pay €13 billion ($23.6b) in back taxes.
Apple said excluding the charge, earnings per share were US$1.64, above consensus estimates of US$1.60.
Overall iPhone sales were US$46.2b compared with US$43.8b the year before.
The company’s services business, which includes the App Store and Apple Pay, continued the strong growth it has seen over multiple quarters, hitting an all-time high of US$24.9b, up about 12% year on year.
Shares of Apple, the world’s most valuable listed company, are up more than 20% year to date. They were 1.3% lower after the results were released.
China sales were flat year on year at about US$15b, an improvement from the declines seen in the previous two quarters of 2024.
On Monday Apple began the launch of its new AI features with software updates for iPhone, iPad and Mac.
The first Apple Intelligence tools, initially available only in US English and limited on smartphones to the iPhone 15 and 16, included a revamped Siri voice assistant, writing aids and AI-powered photo editing tools.
Apple chief financial officer Luca Maestri told the Financial Times sales of the iPhone 16 – the latest model of its flagship smartphone that shipped on September 20 – had been “higher than iPhone 15 sales” during its first eight days of sales in 2023.
Customers were proving receptive to new generative AI features, Maestri said, downloading the new AI-focused operating system at twice the speed that they were for last year’s software update.
More AI features, such as the integration of Siri with ChatGPT and AI-powered emoji and image generation, are being tested and are expected to launch before the end of the year.
Apple’s staggered approach to releasing the features has raised questions about whether any anticipated AI-driven boost to sales will happen in time for the current quarter, which includes its busy holiday period.
Maestri is stepping down as chief financial officer at the start of 2025, with Kevan Parekh, Apple’s vice-president for financial planning and analysis, taking over the role.
Amazon reported a double-digit rise in quarterly revenues as it began to see gains from the “once-in-a-lifetime opportunity” of generative artificial intelligence and strong advertising demand, sending shares higher in after-hours trading on Thursday.
As companies scramble to develop and implement generative AI tools, they are demanding more and more cloud capacity to store their data.
That has presented “an unusually large, maybe once-in-a-lifetime opportunity” for Amazon’s cloud business, said Andy Jassy, the company’s chief executive.
Sales at Amazon Web Services, a crucial profit engine for the e-commerce group, were up 19% year on year, to US$27.5b.
Jassy said AWS already had a “multibillion-dollar” AI business, which was seeing “triple-digit” revenue growth, although he did not give specific figures.
The AI rush has also meant significant capital expenditure.
Amazon spent US$22.6b on property and equipment in the quarter, up from US$12.5b a year before.
“The faster we grow demand, the faster we have to invest capital in data centres and networking gear and hardware,” said Jassy, estimating that Amazon would spend US$75b this year and more next.
“Our customers, businesses and shareholders will feel good about this long term, that we’re aggressively pursuing it,” he added.
The Seattle-based e-commerce company’s overall revenues increased 11% year on year to hit US$159b, beating analyst estimates.
Amazon expects net sales in the current quarter – which includes the holiday shopping season – to come in between US$181.5b-$188.5b, in line with analyst forecasts for US$186.4b.
Net income of US$15.3b for the period was comfortably ahead of analysts’ estimates of US$12.2b and up more than 50% on a year earlier, and revenue from Amazon’s advertising business jumped 19% to US$14.3b.
Shares of Amazon, which are up almost 25% in the year to date, rose 6% in after-hours trading, which would push the company’s market valuation past US$2 trillion.
Amazon’s market capitalisation has more than doubled over the past five years, propelled by growing cloud and advertising businesses as well as expanding margins in its core retail business.
Wall Street reacted negatively to Amazon’s operating margins shrinking last quarter, but the company rebounded from 10% to 11% in the current quarter.
The group is now eyeing generative AI as the primary source of future growth.
Amazon, which recently summoned workers back to the office for five days a week, is in a fierce race with rival “hyperscalers” Meta, Microsoft and Alphabet for a share of the booming AI market.
Generative AI is “cloud 2.0″, according to Gary Robinson, partner at Edinburgh-based asset manager Baillie Gifford, an Amazon investor.
The technology had the potential to dramatically reduce operational expenditure and could ultimately create trillions of dollars of value, “expanding the total addressable market for hyperscalers by an order of magnitude”, he said.
But investors are also looking for evidence that the outlay will be recouped.
Microsoft’s share price fell 6% on Thursday, despite reporting double-digit gains in quarterly profits, after the company warned AI spending would continue to rise and said growth in its cloud division had cooled in the current quarter.
On the back of its results and Meta’s, US stocks suffered their worst day in almost two months on Thursday, with Big Tech companies dragging down the Nasdaq and S&P 500.
Written by: Michael Acton and George Hammond in San Francisco
© Financial Times
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