Apple tops sales and profit forecasts but flags AI costs ahead of holiday sales

Apple surpassed analyst projections for its latest financial quarter, driven by strong iPhone sales and services revenue, on November 3. CEO John Ternus, who succeeded Tim Cook in September, expressed optimism about the company's upcoming product lineup, particularly the foldable Duo, during a call with analysts. However, CFO Kevan Parekh cautioned that Apple's gross margin would decline slightly from the September quarter's 47.9%, likely falling between 45% and 46%, primarily due to increased memory costs and expenses related to the rollout of AI-powered Siri.

In June, Apple partnered with Google to enhance Siri using Google's Gemini model. The company launched three new iPhones, two desktop computers, and a new smart display with Siri AI, as well as a first-ever MacBook Pro with a touchscreen. Apple also introduced Apple Upgrade, a leasing program for US customers. Despite concerns about rising AI costs, Parekh noted that AI presents opportunities for customer upgrades and partnerships, emphasizing Apple's competitive advantage in the AI race due to minimal investments compared to rivals' heavy spending on data centers and AI infrastructure.

The firm anticipates spending approximately US$11 billion over the next year, compared to over US$700 billion projected by Microsoft, Alphabet, Amazon, and Meta for the same period. Apple is currently embroiled in a legal dispute with OpenAI, accusing the AI company of attempting to steal its trade secrets as they both develop consumer hardware devices.