Despite weak iPhone sales and challenges in China, Apple surprised Wall Street with record earnings for its first fiscal 2025 quarter, as it strengthens its competitive position in Internet services as the gatekeeper of the app universe.
Leadership praised the company’s financial performance and business strategy in delivering new products and services to consumers and enhancing shareholder value.
“We were thrilled to bring customers our best-ever lineup of products and services during the holiday season,” said Apple CEO Tim Cook in a statement following the company’s financial results release.
“Through the power of Apple silicon, we’re unlocking new possibilities for our users with Apple Intelligence, which makes apps and experiences even better and more personal. And we’re excited that Apple Intelligence will be available in even more languages this April.”
Kevan Parekh, Apple’s CFO, provided further insight into the company’s profitability and record revenue, the critical drivers of shareholder value.
“Our record revenue and strong operating margins drove EP [earnings per share] to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders,” he said.
“We are also pleased that our installed base of active devices has reached a new all-time high across all products and geographic segments.”
Apple is no longer the traditional maker of smartphones and MacBooks. It’s the maker of scores of devices surrounding its hardware products and has created a large ecosystem, which has helped the smartphone pioneer offer a broad range of services to its members.
That’s how Apple has become the gatekeeper of the mobile internet, beginning to collect fees from every service app downloaded on its core device, the iPhone.
These high margins have attracted the interest of the investment community, including Warren Buffett, who doesn’t usually buy technology shares.
“Apple’s latest earnings highlight a shift in its business model, with strong growth in services helping to offset weaker iPhone sales, particularly in China,” Georgios Koimisis, an economics and finance associate professor at Manhattan University, told The Epoch Times via email.
“The slight decline in iPhone revenue doesn’t necessarily mean Apple is losing momentum. The company still holds significant market power due to its strong brand and loyal customer base.”
However, he sees Apple’s future growth depends on whether its artificial intelligence (AI) features can differentiate its products from cheaper alternatives, especially those from China.
“Suppose its AI tools fail to drive demand and price-sensitive consumers delay upgrades. In that case, Apple may need to introduce more incentives or adjust its pricing, giving buyers more leverage,” Koimisis said.
In addition, he sees a prolonged decrease in iPhone sales impacting Apple’s supply chain, leading to fewer orders and more challenging contract negotiations as Apple tries to maintain its profits.
“Suppliers that depend on Apple may struggle if the company pushes for better deals or moves production to other countries to reduce risks,” he said.
