Apple’s AI phone utterly failed to drive sales

Apple’s iPhone revenue declined nearly 1% to $69.1 billion in its all-important holiday quarter, compared to the same period one year prior. Analysts had expected a 1.4% increase. It’s disappointing not only because the December quarter is Apple’s biggest, but also because it represents the first full quarter of sales for Apple’s new iPhone 16.

Shares are down about 2% in after-hours trading.

Apparently Apple’s AI phone wasn’t enough to drive a much-needed upgrade cycle. With the iPhone 16, the consumer electronics giant reimagined its signature product with artificial intelligence at its base.

“AI will reinvent and provide a new era and a new chapter for iPhone and iPad and the Mac and all of our products over time,” CEO Tim Cook said in an interview with Wired in December. “Because I think it changes the way you interface with the product.”

But Apple Intelligence is not very intelligent so far (some experiments have shown that Siri has gotten even less helpful with its advent) and perhaps consequently hasn’t caused people to buy the iPhone, which represents about half of Apple’s revenue. Apple also hasn’t spent as much as other tech companies on AI capex and outsourced a lot of that to leaders in the space, like OpenAI’s ChatGPT.

On the bright side, not really being considered an AI company after all has proved to be an asset amid this week’s AI tech rout, and Apple is again the world’s most valuable company. This hasn’t, however, protected the stock from a flurry of recent downgrades.

“Today Apple is reporting our best quarter ever, with revenue of $124.3 billion, up 4% from a year ago,” Cook told investors today, numbers which were roughly in line with analyst expectations. That good news, however, was thanks to its Services division and not the iPhone.

Revenue in China, a very important market for Apple, was lower than Wall Street expected, down 11% to $18.5 billion.