Apple just provided its first glimpse at how iPhone 17 sales are going

Apple reported fourth-quarter earnings with overall revenue of $102.5 billion meeting expectations, driven by record services revenue of $28.8 billion, though iPhone sales of $49 billion slightly missed Wall Street estimates. Despite a year-over-year decline in China sales, CEO Tim Cook projected a record December quarter for both revenue and iPhone sales, citing strong iPhone 17 reception and the positive impact of Apple Intelligence on upgrades, leading to a 3% after-hours stock increase. This performance, alongside a recent $4 trillion market cap, signals a significant turnaround for the company, even as it faces $1.4 billion in tariff costs and ongoing scrutiny regarding its AI strategy relative to competitors.

Analysis

Apple reported fourth-quarter revenue of $102.5 billion, meeting analyst expectations and marking a record for the period, up from $94.9 billion year-over-year. Services revenue also achieved an all-time record at $28.8 billion, an increase from $25 billion, highlighting the continued strength and diversification of its ecosystem. iPhone sales, however, slightly missed Wall Street's $50.1 billion forecast, coming in at $49 billion, despite a year-over-year increase from $46.2 billion.

CEO Tim Cook provided an optimistic outlook, projecting the December quarter to be the "best ever for the company and the best ever for the iPhone," suggesting robust iPhone 17 sales. This guidance is critical given concerns about Apple's AI positioning and a year-over-year decline in China revenue to $14.5 billion from $15 billion. Cook anticipates a return to growth in China for the current quarter, citing positive iPhone 17 reception.

The iPhone 17 series demonstrated strong initial demand, outselling its predecessor by 14% in its first 10 days in the US and China, with the base and Pro Max models being most popular. Conversely, the "iPhone Air" is experiencing "muted customer interest," according to UBS. Apple is also leveraging "Apple Intelligence" as a key motivator for upgrades, aiming to address Wall Street's focus on its AI strategy amid intense competition from Google and Microsoft.

Apple shares reacted positively, rising approximately 3% in after-hours trading, reflecting a moderately positive sentiment following a challenging year and its recent achievement of a $4 trillion market capitalization. Investors should note the expected $1.4 billion in tariff-related costs for the current quarter, which represents a near-term financial headwind.

Key Decisions for Investors

• Monitor Apple's December quarter guidance closely for confirmation of projected record revenue and iPhone sales, particularly the recovery in China's market performance.
• Evaluate the long-term impact of "Apple Intelligence" on upgrade cycles and its competitive positioning against rivals' AI advancements, as this could drive future growth and market share.
• Factor in the $1.4 billion tariff cost for the current quarter as a potential short-term margin headwind, while assessing the sustained demand for the iPhone 17 lineup and the performance of specific models like the "iPhone Air."