Apple's Resilient Q3: iPhone Outperforms, AI Push, Regulatory Scrutiny

Apple reported a 4.9% revenue increase in its fiscal third quarter, fueled by stronger-than-anticipated iPhone sales. Despite challenges in China and increased regulatory scrutiny, the company unveiled AI features and plans for extensive R&D investments. Apple's services and iPad segments also surpassed analyst expectations.

Apple on Thursday reported a pivotal return to sales growth in its fiscal third quarter as iPhone revenue exceeded Wall Street expectations. This comes despite a greater-than-expected sales decline in the critical Chinese market. Shares of the tech giant saw a 2% rise in extended trading.

Revenue climbed 4.9% to reach $85.78 billion in the three months ending June 29, beating analysts' predictions of $84.53 billion, according to LSEG data. While iPhone sales dipped 0.9%, they outperformed the anticipated 2.2% fall, thanks to heightened demand prior to the launch of new AI features.

Chief Financial Officer Luca Maestri noted that the iPhone results surpassed expectations. Apple has employed discounts in China to compete with more affordable local alternatives like Huawei. Despite these efforts, sales in Greater China fell 6.5% to $14.73 billion. Analysts had predicted a smaller 2.4% decline.

Analysts foresee a strong upgrade cycle for the upcoming iPhone 16 series, set for a potential September launch. At its developer conference in June, Apple introduced a slew of AI products and services under the banner of Apple Intelligence, which necessitates at least an iPhone 15 Pro, likely driving device upgrades.

Apple's AI initiatives lag behind competitors like Samsung, which has already integrated AI chatbots into their devices. Simultaneously, Apple faces three EU regulatory probes under the Digital Markets Act and a U.S. Department of Justice accusation of monopolistic practices in March.

On the financial front, Apple reported quarterly earnings per share of $1.40, topping Wall Street estimates of $1.35. The company's services segment surged 14.1% to $24.21 billion, while iPad sales spiked by 23.7% to $7.16 billion. Wearables, however, saw a 2.3% decline with sales amounting to $8.10 billion.

Apple maintained its 25-cent dividend and announced a $110 billion stock buyback in the fiscal second quarter.

(With inputs from agencies.)