Apple on Thursday reported third-quarter results that beat Wall Street expectations and a 5% rise in total revenue. After struggling in recent years, the iPad saw its biggest increase in sales during the quarter, from $5.8 billion to $7.2 billion year over year. Tablet sales, driven by the product line's biggest ever refresh, helped make up for slowing iPhone sales, which fell to $39.3 billion from $39.7 billion year over year.
Despite the quarterly sales decline, iPhone remains Apple's most important category, followed by Services, which includes software products like iCloud, Apple TV+, Apple Music, etc. The category continued to grow, increasing to $24.2 billion from $21.2 billion in the year-ago quarter.
The iPhone slowdown was mainly driven by Greater China, where quarterly sales fell to $14.7 billion from $15.8 billion. Reuters reported that Canalys figures released last week showed a notable drop in iPhone sales, dropping 6.7 percent in the quarter from 10.4 million to 9.7 million units.
The decline in Apple's third-largest region (after the Americas and Europe) had a clear impact on the company's profits. The company began aggressively slashing iPhone prices in China in May amid growing competition from domestic rivals, a strategy that helped boost iPhone sales that month, up nearly 40% from a year ago.
Huawei has previously been hampered by U.S. sanctions that cut off its access to software and components from companies like Google and Qualcomm, but it has made a big comeback in its home country since bringing its own chips and Android alternatives in-house.
According to figures from Canalys, Huawei's total sales in China for the quarter were 10.6 million units, marking 41% growth year-over-year, surpassing Apple.
The third quarter marked the second consecutive quarter of decline for global iPhone sales, putting further pressure on the generative AI strategy the company unveiled at WWDC in June.
In an interview with CNBC, CEO Tim Cook said the company has been investing significant resources into growing Apple Intelligence.
“What we've done is redeploy a lot of our talent that was in other roles to AI,” the executive noted. “From a data center perspective, you know, we have a hybrid approach, which means we have both our own talent and partner companies. So that capex goes into the partner companies' finances and we cover the costs.”
Some of these resources reportedly came after Apple ended its self-driving electric car project, Project Titan.