Apple Reports Mixed Q3 Results Following AI Feature Launch

TLDR

• Apple launched its AI suite “Apple Intelligence” with mixed reviews from tech media
• Company stock fell 1.8% to $225.91 despite 6% sales growth
• Quarterly sales reached $94.9B with iPhone sales at $46.2B
• Profits dropped 35.9% due to $14B Irish tax headwind
• Additional AI features including ChatGPT integration coming in December

Apple’s highly anticipated entry into the artificial intelligence arena received a lukewarm reception this week, as the company’s stock dropped 1.8% to $225.91 following its quarterly earnings announcement and the launch of its new AI features.

The tech giant reported quarterly sales of $94.9 billion, marking a 6% increase from the previous year. iPhone sales contributed $46.2 billion to this total, showing continued strong demand for Apple’s flagship product.

However, the company’s profits took a hit, falling 35.9% to $14.7 billion compared to the same period last year. This decline was primarily attributed to a $14 billion tax payment required in Ireland following a recent court ruling in September.

The launch of Apple Intelligence, included in Monday’s iOS 18.1 update, represents the company’s first major push into generative AI.

The new features allow users to perform tasks such as summarizing text, searching photo libraries using natural language descriptions, and transcribing phone calls in real-time.

Early reviews from tech media outlets have been notably reserved. Wired’s senior reviews editor Julian Chokkattu described the AI experience as “quite flat,” while Axios characterized the updates as offering “only modest improvements.”

During Thursday’s earnings call, CEO Tim Cook attempted to paint an optimistic picture of the company’s AI strategy.

“This is just the beginning of what we believe generative AI can do, and I couldn’t be more excited for what’s to come,” Cook stated.

The company announced plans to expand its AI capabilities in December, including integration with ChatGPT and a new Visual Intelligence feature that enables users to search for information directly through their camera app. Non-US English support will also arrive in December, with additional language capabilities planned for April.

When questioned about whether Apple Intelligence had impacted iPhone sales since its launch, Cook avoided a direct answer. Instead, he highlighted that iOS 18.1 saw adoption rates twice as high as iOS 17.1 during the comparable period last year.

The stock continued to decline in after-hours trading, dropping an additional 1.8% to $221.90, according to data from Google Finance.

Apple’s AI rollout comes as other tech giants report success with their own AI initiatives. Both Google and Microsoft announced better-than-expected quarterly results earlier this week, while Amazon credited its AI investments for helping drive strong performance.

The deployment of Apple Intelligence arrives amid intensifying competition in the AI sector, with major tech companies racing to incorporate AI capabilities into their products and services.

Cook emphasized customer and developer response to the new features, stating,

“We’re getting a lot of positive feedback from developers and customers.”

The iOS 18.1 update makes Apple Intelligence available across iPhone, iPad, and Mac devices, marking the company’s first comprehensive AI integration across its ecosystem.

More features are scheduled for release in the coming months, suggesting Apple’s AI strategy will continue to evolve despite the initial measured response from reviewers and investors.

The company plans to expand the geographical reach of these features, starting with English-speaking markets outside the US before moving into multiple language support in 2024.