Apple's blockbuster earnings mask its fading innovation
Phil Rosen
Co-founder & Editor-in-Chief of Opening Bell Daily • Founder of Journalists Club • 2x Author • Prev: Fulbright, Business Insider
Good morning. It’s Friday, and we’re decoding Apple’s earnings, US economic growth, the Fed’s preferred inflation gauge and SoftBank’s potential deal with OpenAI. First time reading? Join over 190,000 self-directed investors and sign up here.
Today’s letter is brought to you by Public!
You can use Public to trade the most popular cryptocurrencies including bitcoin, ethereum, dogecoin, and TRUMP. Build your crypto portfolio in the same place you manage your stocks, bonds, options, and more.
This platform is built for crypto — you can create custom price alerts around what you’re watching, or set up recurring buys that put your strategy on autopilot.
Premium Public members can also unlock advanced crypto data like daily active addresses and transaction volume.
Ready to jump in? Trade on Public today.*
Record revenue doesn’t tell the whole story
Apple’s latest earnings report drew cheers from shareholders. But beneath the surface, iPhone sales are losing momentum, competition is closing in, and innovation isn’t obvious.
It’s hard to imagine risks to a company that boasts more than 2.35 billion active devices and over 1 billion subscriptions.
Here’s how Apple performed in its fiscal first quarter against LSEG estimates:
“Our record revenue and strong operating margins drove EPS to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders,” Apple CFO Kevan Parekh said.
“We are also pleased that our installed base of active devices has reached a new all-time high across all products and geographic segments.”
Those blockbuster financials, however, mask vulnerabilities to what has long been a sure-fire growth story.
In the last year, Apple outperformed the S&P 500 only marginally, and its revenue growth has slowed dramatically since 2022.
In the quarter, iPhone sales fell almost 1% compared to the prior year, even though Apple had just debuted its Apple Intelligence AI feature with the iPhone 16 in September.
The company missed on iPhone sales against Wall Street estimates by the biggest margin in two years.
Recommended by LinkedIn
Some users have reported that the AI tool feels unfinished and inconsistent, and the sales slowdown suggests it isn’t a compelling enough addition to meaningfully accelerate the upgrade cycle.
Critics, too, have called out Apple for lagging behind other Magnificent Seven names in the AI arms race.
In China specifically, sales declined more than 11% to $18.5 billion, below the $20.9 billion forecast. Goldman Sachs and others have warned that Apple is losing ground to domestic brands like Huawei and Xiaomi.
The latest numbers seem to support that.
On an inflation-adjusted basis, Apple’s revenue has barely budged 2021, as Geiger Capital pointed out on X:
Now, Apple has long operated with premium pricing and a loyal fanbase. Yet recent trends suggest its upgrade incentives are losing their pull.
Should that pattern hold, it could mark unfamiliar ground for Apple — working harder and innovating more just to keep growth on track.
Competitors have taken notice. Meta CEO Mark Zuckerberg conveyed all of the above in fewer words during a recent Joe Rogan interview:
“It’s like Steve Jobs invented the iPhone, and now they’re just kind of sitting on it 20 years later.”
Feedback or thoughts? Leave a comment below.
In case you missed it:
Anthony Pompliano and I just launched the Best Ideas Club. Every Sunday, we’ll send members a premium report unpacking one high-conviction trade or investment idea, sourced from an interview with a world-class investor.
For current subscribers, we are offering a special launch price of $197 for the first year to join — that means each investment idea costs less than a cup of coffee.
Lock it in before Saturday, when the annual subscription goes up to $299.
Assistant Vice President, Wealth Management Associate
2moVery helpful