Given the push to launch and expand Apple Intelligence last year, you'd be right to conclude that's Apple thinks its suite of artificial intelligence-powered tools will play a major role in the company's growth. And we got a glimpse of just how major that is, particularly for Apple's iPhone business when the company announced its fiscal first quarter earnings yesterday (January 30).
While Apple reported all-time record sales of $124.3 billion for the three months ended December 29, iPhone revenue growth was essentially flat for the holiday quarter. The iPhone business accounted for $69.1 billion of Apple's sales for the quarter, down slightly from the $69.7 billion the company tallied during the same period a year ago.
Normally, that should set off alarm bells, as the December quarter not only covers the holiday shopping season, but it's also the first full quarter of sales after Apple's traditional fall iPhone launch. A drop in revenue would, on the surface at least, suggest a not-so-great start for the iPhone 16.
However, Apple insists that's not the case. In remarks to analysts after the earnings call, CEO Tim Cook brought up two things about iPhone sales that weren't immediately visible in Apple's balance sheet. For starters, Cook says, the iPhone 16 is actually selling better than the iPhone 15 did over the comparable launch date-through-the-end-of-the-calendar-year period. For another thing, Apple Intelligence appears to be convincing people to get new iPhones.
"Markets where we had rolled out Apple Intelligence .... performed better on a year-over-year basis than markets where we had not."
— Tim Cook
"Markets where we had rolled out Apple Intelligence during the [quarter] performed better on a year-over-year basis than markets where we had not," Cook told analysts. "It’s a positive indicator that we were pleased with."
That might explain a lot about Apple's iPhone numbers. Apple Intelligence launched in October, but only in U.S. English. That meant people in other parts of the world who wanted to use the new features had to change the region setting on their iPhone. By December, Apple introduced localized English versions of Apple Intelligence in the U.K., Australia, Canada, New Zealand and South Africa, so Apple Intelligence was only fully available in those countries for a few weeks during the quarter.
Apple Intelligence expanding
Apple Intelligence will be expanding to more areas soon enough. In April, Apple plans to add more languages to Apple Intelligence — specifically French, German, Italian, Japanese, Korean, Portuguese, Spanish and Vietnamese. Localized English versions are also coming to India and Singapore at that time, along with a Chinese English version.
Apple Intelligence's impact on iPhone 16 sales is certainly a surprise, at least to me. Right after iOS 18.1's release, I put together an assessment of Apple Intelligence, finding some features that I liked, others that I had little use for and mostly things that seemed like works in progress. There was promise to what Apple had come out with, I concluded, but nothing you'd go out of your way to upgrade for.
Based on Apple's data, it seems my analysis was slightly off.
"Apple Intelligence opens up an exciting new frontier and is already elevating experiences across iPhone, iPad, and Mac," Cook said.
Asked by analysts which features people are using the most, Cook specifically cited Writing Tools, Image Playground, Genmoji, Visual Intelligence and the Clean Up tool for editing photos.
"I know from my own personal experience using the features, you can’t imagine not using them anymore," Cook added. "I know I get hundreds of emails a day and the summarization function is so important. So I think it’s a combination of that and of course in April we roll out a whole series of new languages that we had mentioned and so the base grows further."
More hardware to come
It's not just about adding support for additional languages, though. Apple Intelligence's growth hinges upon Apple releasing more devices that can support those features. Right now, the AI tools are limited to the new iPhone lineup, as well as the iPhone 15 Pro and iPhone 15 Pro Max, which feature an AI-compatible A17 Pro chipset.
Apple never comments on unannounced products during its earnings briefings, and the company stuck to that script in this quarter's call with analysts. But certainly more Apple Intelligence-ready devices are in the works — and we could be seeing one sooner rather than later.
It's widely expected that Apple will release a new version of its midrange iPhone SE phone sometime during the spring. And if Apple sticks to its normal pattern of SE releases, the new phone will feature the same silicon Apple introduced the previous fall. That would mean an A18 system-on-chip, which would allow the iPhone SE 4 to run the same Apple Intelligence features currently available to iPhone 16 models.
If so — and if the new SE keeps its price under $500 — that could expand Apple Intelligence to a wider audience. And that's before the likely fall launch of the iPhone 17 lineup brings more Apple Intelligence-ready devices to the market.
Indeed, Apple Intelligence will be crucial to any success Apple enjoys this year, according to a research note from Francisco Jeronimo, a vice president for data and analytics at IDC EMEA.
"Apple Intelligence already played a significant role in this quarter’s results and is expected to remain a key driver moving forward," Jeronimo wrote. "Expanding its availability to Europe (and reaching an agreement with the EU) and to additional Asian markets and languages should be Apple’s primary focus in the year ahead."
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