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Apple’s latest earnings report revealed a mixed performance, with declining iPhone sales offset by a strong overall revenue boost. Despite missing iPhone sales projections, the tech giant exceeded Wall Street expectations in Q1 2025, posting a 4% year-over-year revenue increase to $124.3 billion.
The company’s net income surged 7.1% to $36.33 billion, up from $33.92 billion in the same period last year. However, iPhone sales faced a setback, particularly in China, where revenue dropped by 11.1% to $18.51 billion—marking the steepest decline in the region since a nearly 13% dip in Q1 2024.
The largest smartphone market in the world has become increasingly challenging for the company, largely due to heightened competition from local brands like Oppo and Vivo. Huawei, which experienced a significant decline in sales following trade restrictions from the first Trump administration, has made a strong comeback in its home market.
CEO Tim Cook attributed some of the challenges to the absence of Apple Intelligence in China and other important markets. The small model generative AI platform is, without a doubt, the standout feature of the iPhone 16, which launched late last year.
“During the December quarter, we saw that in markets where we had rolled out Apple intelligence, that the year-over-year performance on the iPhone 16 family was stronger than those markets where we had not rolled out Apple intelligence,” Cook said.
The AI platform is currently accessible in English across Australia, Canada, Ireland, New Zealand, South Africa, the U.K., and the U.S. Chinese is one of the languages expected to be introduced later this year, but Apple has not yet confirmed if the feature will be available in mainland China.
Regulatory approval and security restrictions are key challenges that Apple Intelligence faces in its efforts to launch in China. The company has joined forces with the domestic internet powerhouse Baidu to integrate AI features into iPhones within the country. However, it seems that the agreement has encountered some obstacles.
Sales of the iPhone experienced a slight drop compared to the previous year, despite the company’s expectations for an increase driven by Apple Intelligence. The platform saw a gradual introduction in iOS 18, with features being released in stages. Certain features, such as news summaries, experienced a challenging start too. Apple has temporarily halted the feature to resolve a problem related to the display of inaccurate information.
Revenue for both Mac and iPad saw a 15% increase this quarter, driven by the introduction of the new iPad Mini, iMac, Mac Mini, and MacBook Pro. Services, encompassing offerings such as Apple TV+, Apple Music, and iCloud, experienced a 14% growth for the quarter.
The company currently boasts an impressive install base of 2.35 billion active devices, a notable increase from 2.2 billion at this time last year. Cook highlighted that Apple has reached an impressive milestone of 1 billion subscriptions across its content offerings and third-party applications.
In general, analysts are responding favorably to the news, as the company surpassed expectations in multiple important areas despite facing challenges. This week, Apple made its late entry into the generative AI arena, which helped protect the company as the launch of DeepSeek R1’s platform led to significant purchases for firms such as Nvidia.
