Apple pins hopes on AI for iPhone upgrades as China sales falter

Apple said its third-quarter iPhone sales were better than expected and forecast more gains on Thursday as it bets on artificial intelligence to attract buyers, even as its overall China business disappointed.

Shares of the company rose nearly 1 per cent in extended trading, outperforming other tech stocks that were broadly lower.

Apple is expected to launch this fall what analysts have called the biggest software upgrade for the iPhone. It includes artificial intelligence features and comes at a time when rivals such as Samsung have been quicker to roll out similar services.

Apple said revenue in its fiscal fourth quarter would grow at a level similar to the 4.9 per cent increase it posted in the April-June period, which was better than analysts' estimates.

Sales of iPhone also improved in the third quarter, falling just 0.9 per cent compared with the 2.2 per cent drop analysts expected.

Chief Financial Officer Luca Maestri told Reuters in an interview that the iPhone results were better than he had expected three months ago. "The iPhone 15 family has been doing well from the very beginning and still now - we have three quarters of the year behind us. It is performing better than the previous cycle, the iPhone 14."

Still, China - Apple's third-largest market - remained a drag as sales there declined 6.5 per cent. While that was an improvement from the 8.1 per cent decline in the previous quarter, it was wider than expectations for a drop of 2.4 per cent, according to Visible Alpha.

Maestri said China sales fell less than 3 per cent, excluding the effects of foreign exchange and added that he feels good about Apple's performance in that country, given any softness in its economy.

Apple has taken to discounting its iPhones in China to compete with the much cheaper alternative smartphones offered by local competitors such as Huawei The company in May offered discounts of up to 2,300 yuan ($317) on selected models.