After Apple (AAPL) reported fiscal second-quarter earnings that beat analysts’ estimates and announced a $110 billion share buyback program, company leaders joined the iPhone maker’s earnings call to discuss opportunities related to artificial intelligence (AI), Apple’s upcoming product announcement, growth in its Services segment, and addressed China sales concerns.
Bullish on AI Opportunity
Unlike many of its big tech peers, Apple has been tight-lipped about its AI initiatives so far, but the company said that it is working on AI and sees it as a significant source of opportunity.
CEO Tim Cook said “we continue to feel very bullish about our opportunity in generative AI.” He added that the company believes it has “advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software and services integration, groundbreaking Apple silicon,” and an “unwavering focus on privacy.”
When asked how the iPhone maker is thinking about AI monetization, Cook said he doesn’t want to “get in front of our announcements.”
The CEO underlined that “generative AI is a very key opportunity across [Apple] products” and that the company is “well positioned” with the emerging tech.
Work To Do in China, But ‘Great View’ in Long Term
Several analysts asked Apple executives about the company’s viewpoint on the slowdown in its sales in China, a key concern for many investors.
Cook said “we clearly have work there to do,” though he said he maintains “a great view of China in the long term.”
Cook highlighted a warm reception to Apple’s new store in Shanghai, iPhone sales growth in Mainland China, and said that the iPhone 16 and iPhone 15 Pro Max were the best-selling smartphones in urban China.
He reported that the company saw “an acceleration from Q1 and it was driven by iPhone,” which “means the other products didn’t fare as well.”
Regarding Apple’s prospects in China, “I don’t know how each and every quarter goes,” he said, “but over the long haul, I have a very positive viewpoint.”
Upcoming Product Announcement and Double-Digit iPad Growth
Cook reminded investors of the upcoming event taking place on Tuesday where Apple is expected to announce a new iPad and potentially an upgrade to the Apple Pencil.
“We’re getting ready for an exciting product announcement next week that we think our customers will love,” he said.
Apple CFO Luca Maestri said the company expects iPad revenue to show double-digit year-over-year growth in the next quarter.
Services Revenue Reaches Record High
The company reported record-high Services revenue at $23.87 billion, a 14% increase year-over-year.
Maestri said Apple’s improving gross margin was “driven by cost savings and favorable mix to Services.” He reported that the company’s Services segment had a gross margin of 74.6%, compared to 36.6% for products.
He said that the Services segment’s “overall performance was very strong” and that there were “records in many of our services categories” such as cloud, video, and payment services. He added that some categories are “growing very fast” because “they are relatively smaller in the scheme of [Apple’s] services business.”
The CFO said that Apple expects the strong services growth to continue in the second half of the fiscal year. He noted that “the comps for the services business become a bit more challenging as we go through the year.”
Apple shares were up 6% at $183.56 in extended trading Thursday as of 7 p.m. ET following the call.