All eyes are on Cupertino this week as Apple prepares to release its fiscal fourth-quarter results, offering a crucial test for its strategy of integrating artificial intelligence into its core iPhone business. The performance in China, the world's largest smartphone market, will be a primary focus for investors, alongside the steady growth of its high-margin services division.
AI as the Engine for iPhone's Next Chapter
The recent launch of iOS 18.1, featuring the proprietary Apple Intelligence suite, represents a significant pivot. The AI features, including enhanced writing tools, advanced photo editing, and summarised notifications, are designed to drive a hardware upgrade cycle. These capabilities are available on the iPhone 15 Pro, iPhone 15 Pro Max, and the entire new iPhone 16 series.
Market analysts are watching this closely. "Apple Intelligence will feature heavily," said Josh Gilbert, Market Analyst at eToro. "I'd expect to hear plenty of commentary on the call surrounding that." The success of this AI push is seen as key to initiating what some analysts term an "AI-driven super cycle" for device upgrades.
The Crucial Chinese Battleground
Early data suggests the strategy may be gaining traction in China. According to a Bloomberg report, sales of the iPhone 16 in China rose by 20% in the first three weeks after its release compared to its predecessor. Notably, consumers appear to be opting for higher-end models, with sales of Pro and Pro Max versions surging 44% year-on-year.
This rebound is critical. China accounts for approximately 17% of Apple's total revenue, but the company faces relentless competition. Research firm IDC reported that in the September quarter, Apple held 15.6% of the Chinese market, placing it second behind Vivo (18.6%) and just ahead of a resurgent Huawei (15.3%). The competitive landscape is brutal, with local giants Huawei, Xiaomi, and Vivo all vying for dominance. In the preceding June quarter, Apple had temporarily fallen out of the top five sellers in the country.
Analysts from Wedbush Securities have expressed optimism, noting in a report: "China sales for iPhone 16 will show a strong rebound over the next year with the beginning of this AI-driven super cycle."
European Context and Regulatory Scrutiny
While the immediate financial spotlight is on China, Apple's strategy unfolds under the watchful eye of European regulators. The company's ecosystem, particularly its App Store and services business, faces ongoing scrutiny under the EU's Digital Markets Act (DMA). The bloc's push for greater competition and interoperability presents both a challenge and an opportunity for Apple's business model in one of its key markets.
This regulatory environment adds another layer of complexity for Apple's leadership, including CEO Tim Cook and his potential successors, as they navigate geopolitical and technological tests. The company's future in Europe will depend not just on hardware sales but on adapting its lucrative services model to comply with evolving rules from Brussels and national capitals like Paris and Berlin. For more on the challenges facing Apple's next generation of leadership, read our analysis on John Ternus and the tests for the European market.
Financial Forecasts and Services Growth
Analysts polled by LSEG expect Apple to report revenue of $94.58 billion (€87.42 billion), which would represent a 5.7% year-on-year increase—the company's largest annual growth in two years. Earnings per share are forecast at $1.48 (€1.37).
Key segment forecasts include:
- iPhone revenue: Expected to grow by 3.8%, with revenue from Greater China anticipated to rise 6.6%.
- Services revenue: Forecast to grow by 13%, slightly down from 14% in the June quarter. This segment includes the App Store, Apple Pay, Apple TV+, Apple Music, and iCloud.
- iPad revenue: Projected to increase by 10%, continuing momentum from a 24% surge last quarter driven by new models.
The services business remains a cornerstone of Apple's financial health. "Apple Services remains a big part of the business," noted eToro's Josh Gilbert. "It offers great margins and has been growing at a great pace as well." This high-margin segment is increasingly important as the company invests heavily in AI and contends with hardware market saturation.
The broader AI race, involving other tech giants and chipmakers like Nvidia with its Blackwell architecture, forms the backdrop to Apple's strategy. Meanwhile, the company continues to navigate controversies that intersect with global politics, as seen in recent incidents like the omission of Lebanese villages on Apple Maps.
Apple's share price, which has risen 25% this year and hit an all-time high last week, reflects investor optimism about this AI transition. The upcoming earnings call will reveal whether the reality in key markets like China and Europe supports that confidence, or if fierce competition and regulatory headwinds will temper the narrative of an unstoppable AI-powered upgrade cycle.
