Apple iPhone sales stalled overall in the December quarter, but rose in those markets where the company rolled out artificial intelligence features mostly late in the quarter. The news was generally positive for Apple stock, but shares couldn't hold on to early gains Friday.
The Cupertino, Calif.-based company late Thursday reported mixed fiscal first-quarter results. Apple earned $2.40 a share, up 10% year over year, on sales of $124.3 billion, up 4%, in the quarter ended Dec. 28. Earnings per share topped the consensus estimate of $2.35 while sales were in line with views.
Apple's iPhone sales declined 0.8% to $69.14 billion in the December quarter. Smartphones accounted for 55.6% of Apple's total revenue in the quarter.
"We did see that the markets where we had rolled out Apple Intelligence, that the year-over-year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available," Chief Executive Tim Cook said on a conference call with analysts.
He added, "It's a positive indicator that we were pleased with. There are many compelling reasons to upgrade."
Staggered AI Rollout Limited Adoption
Cook noted the staggered rollout of Apple Intelligence by geographies and features. The company released the first set of AI features in U.S. English for the iPhone, iPad and Mac in October. Apple rolled out more AI features in December and expanded into more English-speaking markets.
"In April, we're bringing Apple Intelligence to more languages, including French, German, Italian, Portuguese, Spanish, Japanese, Korean, and simplified Chinese, as well as localized English to Singapore and India," Cook said. "And we'll continue to roll out more features in the future, including an even more capable Siri."
Current Apple Intelligence features include smart writing tools, image creation and editing tools, and "visual intelligence" where users can learn about their surroundings through their phone's camera.
Apple Intelligence is now available in the U.S., U.K., Australia, Canada, New Zealand and South Africa.
Apple Stock Scores Price-Target Hikes
At least a dozen Wall Street analysts raised their price targets on Apple stock after the company's fiscal Q1 earnings report.
On the stock market today, Apple stock rose as much as 4% to 247.19. But it ended the regular session down 0.7% to 236.
Rosenblatt Securities analyst Barton Crockett reiterated his buy rating on Apple stock and upped his price target to 263 from 262.
Apple is likely to see a meaningful lift to June-quarter sales after it expands AI features into Western Europe, Spanish and the English-speaking Asian countries of India and Singapore, Crockett said in a client note Friday.
Melius Research analyst Ben Reitzes kept his buy rating on Apple stock and raised his price target to 295 from 290.
Apple's sales in China dropped 11% year over year in the December quarter, but should rebound once Apple introduces its AI features in the country, Reitzes said in a report.
AI Momentum Seen Building
TD Cowen analyst Krish Sankar maintained his buy rating on Apple stock and increased his price target to 290 from 250.
"IPhone is seeing early benefits of AI upgrades and momentum should build through the year. China demand could recover as AI features get launched," Sankar said in a client note.
In other news, Apple announced that it now has "well over 1 billion paid subscriptions" across its services offerings. Apple services include AppleCare, iCloud, Apple TV+, Apple Music and more.
Services were a bright spot for Apple in the December quarter, with sales rising 14% year over year to $26.3 billion.
Apple stock is on the IBD Tech Leaders list.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
