Apple shares were steady in the US premarket after the tech group reported record iPhone sales, but left investors worried about costs and a lack of a story around AI.
Apple shares were trading at $258 in the US premarket, barely changed from the cash close yesterday.
There was a lot to like in Apple’s update. iPhone revenue smashed estimates, coming in at $85.3 billion versus the $78.7 billion expected for the quarter. Strong iPhone sales contributed to the group’s record revenue of $143.8 billion.
But record revenue wasn’t enough to spark a rally in shares as investors fretted about the tech giants’ AI strategy. Unlike other Mag 7 stocks such as Meta and Microsoft, Apple isn’t spending mountains of cash on AI. It does, however, lack a coherent narrative about how it will stay relevant in the age of AI.
“Apple delivered a standout iPhone quarter, but investors came away wanting more – specifically, a clearer AI story,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
Rather than spending billions to build out its own models, Apple is set to adopt other firms’ tech by integrating Google’s Gemini into its stack.
This will make Apple a hardware play going forward and may not be as attractive as the players that own the AI technology. That said, you can’t take anything away from record iPhone sales, which demonstrate that Apple’s innovation cycle still works and is able to produce growth in China.
There were signs of weakness in Mac sales – something investors will have a close eye on in the coming quarters.
“Markets were expecting a good quarter for the iPhone, but weren’t expecting to see China firmly back in the mix as a major source of strength,” Britzman said.
“With services steady and Apple continuing to spend light while buying back stock aggressively, a clear divergence is emerging between Apple and the other tech giants.
“The outlook for the March quarter was better than analysts had forecast, but not quite enough to shift the overall mood. Apple is still wrestling with parts shortages and rising component costs, which adds some caution to an otherwise upbeat guide.
“What’s really keeping a lid on things is Apple’s slow progress in AI, a gap that now feels pivotal to close. Investors are looking for practical, AI-powered products that genuinely move the needle – something Apple Intelligence hasn’t delivered. Customers remain fiercely loyal to the brand, but shareholders want to see a clearer plan and real execution, which likely explains why the stock barely budged despite a strong quarter. There’s still a great opportunity at hand for Apple to show it can lead again, not just follow.”