Apple's Holiday Season Outlook: iPhone at the Forefront of Growth

Apple (AAPL.O) has projected robust sales for the upcoming holiday season, fueled by the successful launch of its latest iPhone models. This forecast has bolstered investor confidence, affirming that Apple's flagship product remains a core engine of the company's growth.

The announcement drove Apple's stock price up by over 4% in after-hours trading on Thursday, bringing its year-to-date gains to 8.4%.

Chief Financial Officer Kevan Parekh indicated during a conference call with analysts on Thursday that revenue for the fiscal first quarter, ending in December, is expected to grow by 10% to 12% year-over-year. This contrasts with the previous analyst consensus, which projected growth of only 6%.

Apple CEO Tim Cook expressed his confidence that Apple will return to a growth trajectory in the Chinese market this quarter, stating:

"We expect iPhone revenue to grow by double digits, which will be the best iPhone quarter ever in our history."

This outlook suggests that Apple is successfully navigating multiple global challenges, including trade tensions, weakness in the Chinese market, and delays in the development of AI features.

Q4 Financial Performance

In the fiscal fourth quarter ended September 27, Apple's sales grew by 7.9% to $102.5 billion, exceeding analyst expectations of $102.2 billion. Earnings per share were $1.85, also surpassing the average analyst estimate of $1.77.

Apple benefited in the quarter from stronger-than-expected growth in its services business, which partially offset the impact of the slowdown in the Chinese market. The Mac and wearables divisions also performed better than anticipated.

Tariff expenses increased by $1.1 billion in the quarter, in line with the company's expectations. Apple anticipates tariff costs to reach $1.4 billion in the December quarter. Operating expenses are projected to be between $18.1 billion and $18.5 billion.

Challenges in the Chinese Market

Revenue in the Greater China region decreased by 3.6% in the last quarter, to $14.5 billion, significantly below analyst forecasts of $16.4 billion. Apple faces stiff competition from domestic smartphone manufacturers in the region, as well as difficulties in developing AI features. However, Cook expressed confidence that the company will regain growth in this region during the current quarter.

Growth in the Services Sector

The services sector remains Apple's fastest-growing segment, with revenue increasing by 15% to $28.8 billion, exceeding analyst expectations of $28.2 billion.

Despite strong growth, the services sector faces pressure from regulatory bodies seeking to change App Store policies, which could impact software and subscription revenue. However, Apple recently won a legal battle, with a judge refusing to dismantle its annual $20 billion search agreement with Alphabet (GOOGL.O)'s Google.