Apple had a lot of challenges to start the year. The Apple Watch has been dogged by patent lawsuits, the App Store has come under fire from developers, and the iPhone has faced renewed competition in China.
To top it all off, the company was recently dethroned as the undisputed king of the stock market when Microsoft replaced it as the world’s most valuable public company.
But on Thursday, the tech giant showed the agility and strength of its business, reporting that sales rose 2 percent to $119.58 billion during the three months ended in December. It was Apple’s first quarterly revenue increase in a year and helped the company generate $33.92 billion in revenue during the period, up 13 percent from a year earlier.
The results showed that Apple had the ability to overcome a slowdown in device sales by pushing its massive customer base to buy more apps and services, such as Apple Music. The company said software and services sales rose 11 percent to $23.12 billion during the period.
Apple shares fell about 3 percent in after-hours trading, even as the company beat analysts’ expectations for $117.99 billion in sales. The company said sales in the current quarter would be down from a year ago, disappointing Wall Street analysts who had expected a modest increase.
Although its flagship products, the iPhone and iPad, are more than a decade old, Apple said the number of its devices in use worldwide last year grew by 200 million from the two billion it reported a year ago . Investors are watching that number closely because as iPhones, iPads and Apple Watches proliferate, more people are willing to pay Apple for things like cloud storage.
The iPhone, which accounts for more than half of Apple’s annual revenue, was the only Apple device to see an increase in sales during the quarter. Apple’s launch of a new titanium version of the device last year helped it increase the number of smartphones it sold by five million, according to Canalys, a market research firm. The rise lifted iPhone sales by 6% to $69.7 billion.
However, sales of iPads and wearables such as Apple Watches fell and Mac sales were flat, weighing on the company’s total device sales, which were nearly flat from last year at $96.46 billion.
Apple spent the days leading up to Christmas warning customers that it was going to suspend sales of its Apple Watch because it lost a patent case related to the device’s pulse oximetry function. To keep up sales, it revamped the software of its new watches and removed the feature.
In China, Apple’s second largest market, the company is navigating a slowing economy and increased competition. Chinese consumers are cutting back on spending as China’s mobile phone giant Huawei released a smartphone with high-quality cameras and lower prices than Apple. To keep up, Apple has started discounting iPhones in China.
Sales in China fell 13 percent to $20.82 billion as iPhone totals fell slightly and sales of other products fell, the company said. Analysts had expected sales of $23.33 billion.
Apple’s growth has lagged behind the earnings of other tech giants. On Tuesday, Microsoft said its quarterly revenue rose 18 percent to $62 billion, while Alphabet, the parent company of Google, reported a 13 percent increase in sales.
The value of these companies has soared as they have embraced genetic artificial intelligence, which Apple has been slow to embrace. During a call with analysts, Tim Cook, the company’s chief executive, said the company is spending “enormous time and effort” on artificial intelligence.
“Our MO, if you will, has always been to do work and then talk about work and not get ahead of ourselves,” Mr Cook said. “But we have some things we’re incredibly excited about that we’ll be talking about later this year.”
Apple has focused on launching an augmented reality headset, the Vision Pro. The company put the device, which costs $3,500, on sale in mid-January and has sold its first batch of about 200,000 handsets, according to analyst estimates. The device will start shipping on Friday.
“There is already so much excitement behind this product,” Mr Cook said. “We look forward to people experiencing the magic for themselves.”
