Apple’s AI Offerings Focus On Maintaining User Security
Photo Credit: Maxx Girr from Pixabay
Earlier this month, Apple (Nasdaq: AAPL) announced its third quarter results that continued to outpace market expectations. Despite declining iPhone sales, Apple saw significant upside in its other businesses as it continues to push forward on its AI-focused journey.
Apple’s Financials
Apple’s third quarter revenues fell 4.9% to $85.78 billion, ahead of the market’s forecast of $84.53 billion. EPS of $1.40 was also ahead of the Street’s forecast of $1.35.
By segment, iPhone revenues fell 1% to $39.3 billion compared with the Street’s forecast of $38.81 billion. Mac revenues grew 2% to $7.01 billion, shy of the estimate of $7.02 billion. iPad revenues grew 24% to $7.16 billion, ahead of the market’s forecast of $6.61 billion driven by the latest iPad release. Other product revenues fell 2% to $8.1 billion, ahead of the market’s estimated $7.79 billion. Services revenues grew 14% to $24.21 billion and were also higher than the market’s expected $24.01 billion for the quarter.
While the numbers looked strong, the market was concerned about Apple’s performance in China. China is Apple’s third-largest market, and its sales fell 6.5% over the year, better than previous quarter’s 8.1% decline, but worse than the market’s expected drop of 2.4%. After adjusting for currency swings, Apple would have reported a 3% decline in sales in the region. Apple has been pushing sales in the country by discounting its iPhones to compete with the cheaper options available in the regional markets.
Apple did not provide an outlook for the fourth quarter but mentioned that it is looking at similar growth rates for the coming period. The market estimated EPS of $1.55 on $93.04 billion in revenues for the current quarter and $6.61 on $388.42 billion in revenues for the current fiscal year.
Apple’s AI Measures
During the quarter, Apple announced updates to its software platforms including Apple Intelligence – a personal intelligence system that leverages generative AI models at the core of iPhone, iPad, and Mac. Apple Intelligence is deeply integrated into iOS 18, iPadOS 18, and macOS Sequoia. It leverages Apple silicon to understand and create language and images, take actions across apps, and draw from personal context to simplify and accelerate everyday tasks.
Apple showcased some of the AI-based use casts that will include capabilities like Rewrite to choose from different versions of what has already been written to adjust the tone, Proofread to check for grammar and suggest edits, Summarize to help users select text in the form of a digestible paragraph, bulleted key points, a table, or a list, Image Playground will let users create images quickly in either Animation, Illustration, or Sketch styles.
Overall, these use cases will help improve user experience by offering prioritization and summarization capabilities. The impact of the Apple Intelligence service on sales will be available only after Apple starts shipping these out to customers later this fall. Apple is also integrating ChatGPT into experiences within iPhone, Mac, and iPad, to help users to draw on a broader base of world knowledge. ChatGPT integration with Siri is expected before the end of the calendar year.
Apple is keeping its focus on security while building these AI tools and the Private Cloud Compute (PCC) is setting a new standard for privacy in AI, with the ability to flex and scale computational capacity between on-device processing and larger, server-based models that run on dedicated Apple silicon servers. PCC delivers an end-to-end AI architecture and a private cloud enclave extension of a user’s iPhone that will provide more control over data. Apple will be able to mask the origin of AI prompts and prevent anyone, including Apple itself, from accessing user data. Some experts believe that this will be “as close to end-to-end encryption for cloud AI as you can get”. Apple wants to ensure that AI used on any Apple device mirrors the phone’s security.
Apple Vision Pro also delivered a strong performance by providing customers with the ability to customize their own workspaces, watch movies on 100-foot screens, and exploring entirely virtual worlds with ease. The developer community continues to build solutions for the glasses, and there are already 2,500 native spatial apps and 1.5 million compatible apps for Vision OS offering unique spatial experiences that are only possible with Vision Pro. Apple is working on bringing new immersive content to Vision Pro, including new series, concerts, and films.
Despite the fall in iPhone sales, this was a record quarter for Apple. The revenue growth was attributed to improved sales for iPads following the latest release a quarter ago. Apple noticed that a significant portion of the buyers for iPads were new users, suggesting that the market was not yet saturated and there was scope for expansion. Similarly, two-thirds of the Apple Watch buyers were new to the product. With AI services being so new as well, Apple truly has significant market potential yet to be tapped.
Apple’s stock is trading at $217.53 with a market capitalization of $3.31 trillion. It touched a 52-week low of $164.08 in mid-April this year and a 52-week high of $237.23 in July. Recently Apple’s stock took a beating when news came out that Warren Buffet had slashed Berkshire’s Apple stake by 13% in the first quarter of the year and and another 49% in the second quarter ending June. Berkshire attributed the reduction in its holding to its risk strategy.
More By This Author:
Cloud Stocks: Google Introduces AI Copilots All Over Its Product Portfolio?
Meta Unveils Long Term AI Use Case Potential
Cloud Stocks: Microsoft Trying Hard To Keep Up With AI Demand
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...
moreComments
![](/images/tinyMceCommentImg.png)