Apple set for big sales decline as investors await AI in iPhones

Apple's plan to add generative AI to its iPhones and revive sagging sales in the crucial Chinese market will be in focus on Thursday, when the tech giant is expected to report its biggest quarterly revenue decline in more than a year.

Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling more than 10% year to date as fears mount about its slow roll out of AI services and as a resurgent Huawei takes market share in China, reports Reuters.

Analysts on average see iPhone sales, which account for about half of Apple's revenue, falling 10.4 per cent in the first three months of 2024, according to LSEG. That drop would be the steepest in more than three years.

Analysts estimate Apple's total revenue declined 5.0 per cent in its second quarter, which included January through March. That would be Apple's biggest revenue decline since the December-quarter of 2022, when revenue fell 5.5 per cent.

Apple earlier this year lost the crown of the world's most valuable company to Microsoft and its market value now stands at $2.68 trillion after the decline in its share price in 2024.

Weak revenue and falling shares have put pressure on Apple to spruce up its flagship device after years without major upgrades.

The company is in talks with OpenAI and Alphabet-owned Google to add genAI features for the iPhone that could be unveiled at what is expected to be its biggest-ever annual developer conference in June, Bloomberg News has reported.

Analysts believe such an AI integration could drive demand for the next iPhone series, expected to be announced in the fall.

While executives at Microsoft, Alphabet, Meta Platforms and other major technology firms have talked up their AI strategies on quarterly conference calls in recent months, Apple CEO Tim Cook has discussed his plans for the emerging technology much less.

Adding AI features to iPhones could also help Apple to compete better with Huawei and Samsung Electronics, which reclaimed the title of the world's top smartphone vendor from Apple earlier this year, driven by demand for the AI features in its Galaxy S24 smartphones.

"Replacement cycle tailwinds and incremental generative AI features set up Apple well for a strong iPhone 16 cycle," Bernstein analyst Toni Sacconaghi said this week, upgrading his rating on the company's shares to "outperform" from "market-perform".