Apple posted a sales increase for the all-important holiday quarter, ending a recent slump that had been one of the company’s worst earnings streaks in more than two decades.
On Thursday, Apple reported revenue of about $120 billion, up 2.1% from the October-to-December period a year earlier, and net income of $34 billion, up 13%. Both of those figures exceeded analyst expectations, according to FactSet.
Apple’s crucial iPhone business grew nearly 6% from the same year-ago quarter, with $69.7 billion in sales versus the $67.6 billion analysts had projected.
Apple said it has surpassed 2.2 billion active devices for its products. “This is obviously the engine for the company and for the future,” Chief Financial Officer Luca Maestri said in an interview.
Shares fell by about 3% in after-hours trading.
Apple’s results underscored the strong performance this earnings season of the largest technology companies, especially among those that are infusing their products and services with artificial intelligence. Microsoft reported its strongest profit growth in more than two years as it continues to refresh many of its business software offerings with the same technology behind ChatGPT.
Shares in Facebook-parent Meta Platforms rose by more than 14% after its results, as it detailed the ways in which AI has helped wring profits from Instagram’s Reels and other platforms. Google parent Alphabet recorded advertising sales that missed Wall Street expectations but marked a fourth straight quarter of accelerating sales growth.
“Everyone is getting valuation bumps on AI,” said Trip Miller, managing partner at Gullane Capital Partners, an Apple shareholder. “Apple is telegraphing a wait-and-see approach. You never want to say Apple is behind, but from a signaling standpoint it seems like other large tech companies might have a bit of a lead.”
On Apple’s earnings call, Chief Executive Tim Cook said the company is investing in artificial intelligence and that it plans to share details of its work later this year.
The iPhone-maker has faced a confounding array of challenges in the last year, including regulatory scrutiny around the world on its App Store policies, falling sales in China and restive investors wary about the company’s growth prospects. Several analysts have downgraded the stock this year.
The company saw four consecutive quarters of year-over-year declines in revenue. The last time that happened was in 2001, shortly before Apple launched the iPod after co-founder Steve Jobs returned as chief executive. For its fiscal 2023 that ended in September, sales declined 2.8%.
For the current period ending in March — Apple’s fiscal second quarter — the company said it expects total revenue and iPhone sales to be similar to the same quarter a year earlier.
In China, Apple’s third-largest market, revenue declined by about 13% to $21 billion, missing analyst estimates.
China has been the most concerning aspect of Apple’s business for investors. Homegrown champion Huawei has been gaining ground since getting back into high-end phones to take on Apple. And in recent months, China ordered central government employees to not use iPhones or other foreign phones for work, The Wall Street Journal reported in September.
In January, Apple began offering a rare discount for its latest iPhones in the China market to counteract a downturn.
In the final quarter of 2023, overall China smartphone sales grew 6.6% from the prior year, breaking a 10-quarter streak of declines, according to Counterpoint Research. Apple maintained the top position with a 20.2% share of the market, but its sales dropped 9%, while Huawei’s sales advanced 71%.
Investors are closely scrutinizing Apple’s prospects in its services division, which was once championed as a future growth engine as iPhone growth slowed. For the December quarter, revenue from services was $23.1 billion, up 11.3%, slightly missing analyst estimates.
On Friday, the first-generation of the Apple Vision Pro is shipping to customers who preordered the product. Apple’s first major new product in nearly a decade, the Vision Pro is a virtual-reality headset that can place digital objects around in the user’s physical environment.
While the Vision Pro has drawn enthusiasm from potential customers, investors and analysts don’t expect the expensive headsets to contribute much to overall sales anytime soon. Apple hasn’t disclosed how many headsets it has sold, but the number is projected to be between 160,000 to 180,000 units when it initially went on sale, according to TF International Securities analyst Ming-Chi Kuo. Early reviews have been tentatively positive but point to areas that could be improved, such as price and weight.
Write to Aaron Tilley at aaron.tilley@wsj.com