To The Moon

Apple’s AI Debut and Product Launch

On October 28, Apple is set to officially launch its new Apple Intelligence alongside iOS 18.1. This update is expected to bring new AI-driven features to the iPhone 16 and iPhone 15 Pro series, including a Writing Tool suite for text proofing, a Clean Up in Photos feature, Notification Summaries, and enhanced Siri functionality. In addition, Apple is rumored to release a series of Mac computers equipped with M4 chips, optimized to support these AI capabilities.

Analysts’ Expectations and Market Reactions

While Apple Intelligence offers promising new features, early reviews from tech journalist Mark Gurman suggest that the functionalities might fall short of high consumer expectations, potentially leading to disappointment. TF International Securities analyst Ming-Chi Kuo notes that while some investors anticipate a strong boost in iPhone sales due to these AI features, Apple’s recent decision to reduce orders may indicate a more cautious outlook for near-term sales.

Anticipated Sales Impact and Strategic Adjustments

Ming-Chi Kuo estimates that iPhone 16 orders may be reduced by approximately 10 million units over the next three quarters, signaling that the AI functionalities may not have a transformative effect on flagship smartphone sales. Some analysts believe that while this initial launch of Apple AI may not drive significant upgrades, upcoming features currently in developer testing could be more compelling and align with exciting previews from Apple’s WWDC event.

Q4 Earnings and Revenue Expectations

Apple will report its Q4 earnings for fiscal year 2024 on November 1 at 2:00 a.m. In Q3, Apple achieved a 4.9% year-over-year increase in revenue, reaching $85.78 billion, and a 7.9% rise in net income, totaling $21.45 billion. However, iPhone sales declined slightly to $39.3 billion, while services revenue grew significantly by 14% to $24.21 billion, reflecting Apple’s focus on expanding its service segment.

Ongoing Challenges in the Greater China Market

Q3 marked Apple’s sixth consecutive quarter of beating revenue and earnings expectations, with service revenue reaching record highs. However, sales in Greater China showed a sharper-than-expected year-over-year decline for iPhones. Despite this, CEO Tim Cook maintains long-term confidence in the Chinese market, viewing it as a key area for sustained growth.

Q4 Forecast and Future Revenue Growth

For Q4, Wall Street expects Apple’s revenue to grow by 3.2% year-over-year, from $81.8 billion to $84.4 billion, with iPhone sales projected to return to growth after two quarters of decline. Apple executives have emphasized that AI will be an additional selling point for new iPhones, with overall revenue growth in Q4 expected to mirror Q3, driven by double-digit growth in service revenue.