New York — When Apple CEO Tim Cook introduced the iPhone 16 last month, he emphasized the device’s innovative Apple Intelligence features, promising a “supercharged” experience that would take the iPhone to new heights. Now, Apple’s third-quarter earnings report has provided the first glimpse into how this strategic bet on AI has begun to impact iPhone sales.
For the three months ending in September, Apple reported iPhone sales of $46.2 billion, a 5.5% increase compared to the same period last year. Although modest, this uptick exceeded analysts’ forecasts, especially given the challenging market environment facing the tech giant. The earnings report reflects just over two weeks of iPhone 16 sales, capturing the period from the device’s preorder date of September 13 to the end of the quarter on September 30. With official sales beginning on September 20, this brief window provides early insights into whether the iPhone 16 has managed to capture consumer interest, potentially signaling a new growth phase for Apple.
Apple’s reliance on the iPhone 16 to turn around its recent sales challenges is clear. Over the past year, Apple has reported four consecutive quarters of declining year-over-year revenue, partly due to slower iPhone sales and broader economic factors. Apple Intelligence, the new AI-powered feature set within the iPhone 16, is Apple’s latest effort to differentiate the device from previous models, offering enhanced functionality that the company hopes will inspire users to upgrade in large numbers. Analysts have suggested that this could drive a “supercycle” of demand, creating a renewed sense of excitement around Apple’s product lineup.
Apple’s quarterly sales include those of earlier iPhone models, yet the iPhone 16’s launch appears to have made a notable contribution to growth. In the third quarter of last year, when the iPhone 15 was released, iPhone revenue grew only 2.8% year-over-year, indicating that the appeal of Apple Intelligence may be drawing in more consumers. Overall, Apple’s revenue rose by 6% year-over-year to $94.9 billion, slightly exceeding Wall Street’s projections, though the company reported a 35% decrease in profits compared to the prior year. This mixed result led to a 1% decline in Apple’s stock in after-hours trading, reflecting investors’ cautious outlook.
On Apple’s earnings call, Cook pointed to the quick adoption of Apple Intelligence, noting that iOS 18.1 has achieved twice the adoption rate of iOS 17.1. He attributed this enthusiasm to the appeal of the new AI-powered features, which include advanced writing tools and the ability to record, transcribe, and summarize calls. However, these capabilities were only recently made available, so early adopters of the iPhone 16 did not initially have access to the full suite of Apple Intelligence features. The company plans to release additional capabilities with iOS 18.2 in December, which may drive further upgrades as consumers seek to experience the enhanced functionality.
This phased release strategy for Apple Intelligence has added intrigue but may also have tempered initial iPhone 16 demand, as some consumers appear to be waiting for the full feature set before committing to an upgrade. Analysts such as Angelo Zino of CFRA Research have been closely watching this trend, with early iPhone 16 sales and Apple’s fourth-quarter guidance emerging as critical factors for assessing Apple’s prospects.
Cook also underscored Apple Intelligence’s role in advancing the company’s commitment to user privacy, a cornerstone of Apple’s brand. He suggested that the AI-powered tools in the iPhone 16 could enhance the device’s appeal as the holiday season approaches, with millions of users who have not upgraded in years potentially being enticed by these new capabilities. Wedbush analyst Dan Ives, in a recent note, estimated that there are approximately 300 million iPhones worldwide that have not been replaced in over four years, adding to the potential for a strong holiday season.
China, one of Apple’s most critical markets, has also been a focal point. Apple cut prices earlier this year to stay competitive against local brands, and the iPhone 16 launch is being watched closely as a possible catalyst for market share growth. Although third-quarter revenue from China was nearly flat at approximately $15 billion—falling short of the $16.1 billion target set by analysts—many industry experts remain optimistic, citing the enduring strength of Apple’s brand and customer loyalty in the region.
With the holiday quarter now underway, Apple is betting on the sustained appeal of the iPhone 16 to drive strong performance. Emarketer analyst Jacob Bourne remarked that while the staggered release of Apple Intelligence features may moderate the immediate upgrade momentum, Apple’s combination of solid services revenue growth and a promising iPhone 16 launch positions the company well for the coming months.
