With iPhone sales and profits sliding, Apple Inc on Tuesday sought to highlight its growth in services as it seeks to reduce dependence on its main cash driver.
In its quarterly update, Apple said profits slumped 27 percent from a year ago to US$7.8 billion on a sharp drop in iPhone sales.
Apple sold 40.4 million iPhones in the quarter ending on June 25, down 15 percent from a year earlier.
It was the second straight quarter of slumping iPhone sales for the company, but the company has seen success with its lower-priced iPhone SE launched earlier this year.
The company said its iPad unit sales fell 9 percent from a year ago, but revenues rose due to the launch of higher-priced tablets. Mac sales were down 11 percent.
Overall revenue was down 15 percent from a year ago at US$42.4 billion.
Chief executive Tim Cook said the results showed “stronger customer demand and business performance than we anticipated at the start of the quarter.”
Apple said its services revenue rose 19 percent year-over-year.
“The growth was broad-based with App Store revenue up 37 percent to an all-time high,” Cook said in a conference call.
Apple’s report showed a sharp drop in revenue from China, which reverses gains since it began selling its iPhones there.
Revenue from “Greater China” slumped 33 percent from a year ago to US$8.8 billion.
Some analysts say Apple needs to move quickly to diversify its product base to keep growing.
“Since Apple makes about two-thirds or more revenues on its iPhone sales, declines are particularly troubling there,” said Jack Gold, a technology analyst at J. Gold Associates.
Apple is moving into new areas such as Apple TV and streaming music which could produce more stable revenues, but so far these areas have had minimal impact.
Cook also peeled back the curtain ever so slightly on the firm’s work in artificial intelligence and augmented reality, aiming to reassure investors that the company is ready to ride the next wave of technology.
Raving about hit smartphone game Pokemon Go, Cook said that Apple is “high on [augmented reality] for the long-run” and investing heavily.
Cook also highlighted Apple’s investment in artificial intelligence, which the company now uses to recommend content to users and even spot usage patterns to improve a device’s battery life.
It was a small glimpse of the future from the notoriously secretive tech giant, which fiercely guards its product pipeline.
However, analysts said Cook must do more to show his cards as sales of the iPhone slow.
“They are running behind, and they are trying to catch up both in perception, but also in fact,” said Oren Etzioni, chief executive of the Allen Institute for Artificial Intelligence and a professor at the University of Washington.
Ultimately, phenomena such as artificial intelligence and augmented reality will only reinforce the importance of the iPhone, Cook said.
He said the company was working to make sure its products worked well with third-party products like Pokemon Go.
“That’s why you see so many iPhones in the wild right now chasing Pokemons,” he said.
Additional reporting by Reuters
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