Apple Inc. (NASDAQ: AAPL | AAPL Price Prediction) earnings exceeded almost all expectations. Revenue rose 10% to $94 billion, while earnings were up 12% to $1.57 per share. Apple’s proud new chief financial officer, Kevan Parekh, said “Our installed base of active devices also reached a new all-time high across all product categories and geographic segments, thanks to our very high levels of customer satisfaction and loyalty.”
The iPhone got the credit. Revenue from Apple’s best-selling product increased 14% to $44.6 billion. That is 47% of all the company’s revenue. The performance was slightly better than Apple’s Services business, which posted a 13% gain to $27.4 billion. Services was supposed to become the company’s growth engine as iPhone sales dwindled. It did not work out that way, as iPhone sales growth stunned many investors.
Apple’s Achilles’ heel is still China, the world’s largest smartphone market by far, with over a billion smartphone owners. That is more than three times the U.S. number. Revenue in what it calls Greater China was up just 5% to $15.4 billion. The company cannot afford to have China broken this way. The market is just too big.
Apple’s China challenge is that local companies dominate the nation’s smartphone market. In the first quarter, Huawei and Xiaomi had market shares of 19% each. Apple’s was 15%, which tied it with Oppo. Close behind were Vivo at 14% and Honor at 13%.
Apple is still trying to find an artificial intelligence (AI) partner in China. It needs a local partner to adapt the iPhone to the market. Apple is already having a problem with its AI product launch, now slated for 2026. The AI market in China is partially controlled by the government. That makes the company’s challenge particularly difficult.
The earnings announcement may calm some investors because of strong iPhone sales. However, the stock is still down 15% this year, compared to an advance of 8% by the S&P 500.
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