On February 1st, US time, Apple released its financial report for the first quarter of the 2024 fiscal year (as of December 30th, 2023), which showed that Apple's revenue for the quarter was $119.6 billion, a year-on-year increase of 2%, with service revenue reaching a historic high. However, in the first quarter, Apple's revenue in Greater China was $20.82 billion, a year-on-year decrease of 13%.
Apple CEO Tim Cook stated that the company still has four best-selling phones in China and remains optimistic about the future.
Cook also stated that Apple will announce new artificial intelligence features in 2024. Previously, it was speculated that iOS 18 would fully incorporate generative AI technology, which is likely to include RCS messaging support and Siri intelligent optimization. As usual, this update is expected to be announced at the Apple Developer Conference in June and officially launched in the fall. In addition, Apple also intends to extend this generative AI feature to more applications on its platform, including Apple Music, Pages, Keynote, and Xcode.
Apple's revenue has returned to year-on-year growth, but the revenue in the Chinese market has significantly declined
According to Apple's financial report, the total revenue for the quarter reached $119.6 billion, with an average daily net profit of about 2.65 billion yuan, higher than analysts' expectations of $117.97 billion, and Apple's revenue returned to year-on-year growth, a 2% year-on-year increase.
It is worth mentioning that iPhone sales reached $69.7 billion in the quarter, a 6% increase compared to the same period last year and higher than the expected $68.55 billion. This is also the first full quarter to reflect the revenue of the iPhone 15 series.
From a regional revenue perspective, revenue in the Americas, Europe, Japan, and other Asia Pacific regions has shown an increasing trend, except for the Greater China region where revenue has declined to $20.819 billion, a 13% decrease from $23.905 billion in the same period last year.
The decline in revenue for Apple in the Chinese market this quarter may be related to the recent continuous price reductions and promotions. According to IDC's latest quarterly tracking report on mobile phones, the shipment volume of China's smartphone market in the fourth quarter of 2023 was approximately 73.63 million units, a year-on-year increase of 1.2%, marking the first rebound after 10 consecutive quarters of year-on-year decline. Among them, Apple's sales decreased by 9.0% year-on-year, but still maintained its first position with a market share of 20.2%, with Honor, vivo, Huawei, and OPPO ranking second to fifth respectively.
IDC analysis shows that Apple has been significantly impacted by competitors in the domestic high-end market, coupled with limited product upgrades, resulting in a decrease in attractiveness. However, despite significant price reductions and promotions from third-party channels, it has still attracted more consumers. Although it no longer has significant advantages compared to Android flagship products, the overall comprehensive product strength of iPhone is still among the best. However, the price maintenance of Apple products is not as strong as before, and the adjustment time for channel delivery prices is getting earlier and earlier.
Despite experiencing a decline in sales in the Greater China market, Apple CEO Tim Cook stated that the company still has four best-selling phones in China and remains optimistic about the future.
In terms of other product services, Apple's first quarter service revenue was $23.12 billion, with analysts expecting $23.37 billion; Earnings per share of $2.18, analyst expectation of $2.11; Mac revenue is $7.78 billion, with analysts expecting $7.9 billion; IPad revenue is $7.02 billion, with analysts expecting $7.06 billion; Wearable devices, home furnishings, and accessories revenue is $11.95 billion, with analysts expecting $12.02 billion.
Among them, iPad sales have significantly decreased by 25%, while wearable devices and home products businesses have also experienced an 11% decline. This may be related to the fact that Apple did not launch an iPad product in 2023. However, recently, according to well-known Apple product whistleblower Mark Gurman, Apple plans to release new products such as the iPad Air, iPad Pro, and MacBook Air by the end of March. Industry insiders have stated that the update intensity of the iPad product launched in March will be the highest in recent years, which also shows Apple's determination to re value the iPad product line.
Cook stated that in the first quarter of the 2024 fiscal year, Apple had over 2.2 billion active devices, reaching a historic high.
Apple may join the "AI" camp this year
It is worth noting that Cook stated at the financial report that Apple will announce new AI (Artificial Intelligence) features this year.
A reporter from Nandouwan Finance News noticed that there have been reports that Apple has added applications for AI technology and RCS in the iOS18 it is expected to launch this year, and internally, Apple sees the iOS18 as the most important update in history.
Famous Apple product whistleblower Mark Gurman revealed that the IOS 18 will adopt generative AI technology to improve Siri and Messages applications in problem-solving and automatic sentence completion. On this basis, Apple also explores generative AI features for other applications on its platform, including Apple Music, Pages, Keynote, and Xcode.
In terms of hardware preparation, Jeff Pu, an analyst at Haitong International Securities in Hong Kong, previously released a report stating that Apple may have built hundreds of AI servers in 2023, and this number will significantly increase in 2024. He also pointed out that Apple plans to adopt generative AI technology on iPhones and iPads as early as the end of 2024. This means that if the plan is implemented, users are expected to experience the Apple big model firsthand on the next generation iPhone and iPad that will be released at the end of 2024.
In recent years, with the emergence of Chat GPT, mobile phone manufacturers who are fiercely competitive but unable to control the continuous decline in sales have seen a new competitive path, a key breakthrough that can truly achieve smartphone differentiation and increase shipment volume - the AI big model.
At present, domestic and foreign mobile phone industry chain manufacturers are actively "opening up" the AI big model track. On the domestic side, companies such as OPPO, vivo, Huawei, Xiaomi, Honor, etc. have all announced their own mobile phone models to the public. In terms of foreign manufacturers, Google released multiple mobile phones, tablets, and IoT products in 2023, all promoting the concept of AI. Google Pixel8 Pro is equipped with a brand new Gemini artificial intelligence chip and provides functions such as intelligent reply and recording that can also be used offline. Recently, Samsung announced that its newly developed Galaxy AI has been applied to the newly released Galaxy S24.
In fact, as a new phenomenon, AI smartphones have indeed brought impact to the stagnant mobile phone market in recent years. A reporter from Nandouwan Finance Society found that the first batch of "crab eaters" have been receiving good news recently. The transaction volume of vivo X100 series has exceeded 1 billion RMB in total; The omnichannel sales of the OPPO Find X7 series within 5 minutes of its launch reached 402% of the previous generation, and on the day of its first sale, the omnichannel sales also reached 317% of the previous generation; Samsung's Galaxy S24 has also achieved pre order sales of 1.21 million units in South Korea. It has been proven that the addition of the new generation of AI has indeed brought huge sales growth to mobile phone manufacturers, and also confirms consumer expectations for the application of AI technology on mobile devices.
On this basis, in the future, there will only be more and more smartphones equipped with AI, and the development of mobile AI will also become more and more "rolling". According to a report by Counterpoint Research, a foreign professional research company, the shipment of smartphones equipped with intelligent AI is expected to exceed 100 million units in 2024 and reach 552 million units by 2027, accounting for 40% of the global market.
However, Apple has yet to officially announce its AI progress to the public, and compared to its peers, Apple has taken a few steps slower. However, some industry insiders have pointed out that in recent years, Apple's strategy for using new technologies has become less passionate, and it is only after the technology matures and the market accepts that it truly intervenes. For example, Apple's first 5G phone is like this, which is officially launched nearly a year after various manufacturers release it.
Guotai Junan Securities believes that the consumer electronics industry has gone through a period of weak demand since 2020 and is about to usher in a new round of device replacement cycle in 2024. With the start of the replacement cycle and the support of new AI smartphones, Apple, as a leader in the global consumer electronics industry, has a relatively stable market share and is expected to benefit first from this round of recovery.