Apple has had plenty of challenges to start the year. The Apple Watch has been altered by patent lawsuits, the App Store has come under fire from developers, and the iPhone has faced renewed competition in China.
Topping it all off, the company was recently dethroned as the undisputed king of the stock market when Microsoft replaced it as the world’s most valuable public company.
But on Thursday, the tech giant showed the versatility and strength of its business, reporting that sales rose 2 percent to $119.58 billion during the three months that ended in December. It was the first quarterly revenue increase for Apple in a year and helped the company deliver $33.92 billion in profit during the period, a 13 percent increase from a year earlier.
The results showed that Apple had the ability to overcome a slowdown in device sales by getting its enormous customer base to buy more apps and services, such as Apple Music. The company said sales of software and services rose 11 percent to $23.12 billion during the period.
Shares of Apple fell about 3 percent in after-hours trading, even though the company exceeded analysts’ expectations for $117.99 billion in sales. The company said sales in the current quarter would be down from a year ago, disappointing Wall Street analysts who had expected a modest increase.
Though its signature products, the iPhone and iPad, are more than a decade old, Apple said the number of its devices in use around the world last year had increased by 200 million from the two billion it reported a year ago. Investors watch that figure closely because as iPhones, iPads and Apple Watches proliferate, more people are willing to pay Apple for things like cloud-computing storage.
The iPhone, which accounts for more than half of Apple’s annual revenue, was the only Apple device to post an increase in sales during the quarter. Apple’s release of a new, titanium version of the device last year helped it increase the number of smartphones it sold by five million, according to Canalys, a market research firm. The uptick lifted iPhone sales 6 percent to $69.7 billion.
But sales of iPads and wearables such as Apple Watches declined, and Mac sales were flat, weighing down the company’s total device sales, which were almost the same as a year earlier at $96.46 billion.
Apple spent the days before Christmas warning customers that it was going to have to suspend sales of its Apple Watch because it lost a patent case over the device’s pulse oximetry feature. To continue sales, it overhauled the software of its new watches and removed the feature.
In China, Apple’s second-biggest market, the company is navigating a slowing economy and increased competition. Chinese consumers are cutting back on spending, while Huawei, China’s cellphone giant, has released a smartphone with high-quality cameras and lower prices than Apple. To keep pace, Apple has begun discounting iPhones in China.
Sales in China fell 13 percent to $20.82 billion as iPhone totals dipped slightly and sales of other products faded, the company said. Analysts had expected sales of $23.33 billion.
Apple’s growth lagged the gains posted by other tech giants. On Tuesday, Microsoft said its quarterly revenue had risen 18 percent to $62 billion, while Alphabet, Google’s parent company, reported a 13 percent increase in sales.
The value of those companies has soared as they have embraced generative artificial intelligence, which Apple has been slower to take on. During a call with analysts, Tim Cook, the company’s chief executive, said the company was spending “a tremendous amount of time and effort” on artificial intelligence.
“Our M.O., if you will, has always been to do work and then talk about work and not to get out in front of ourselves,” Mr. Cook said. “But we’ve got some things that we’re incredibly excited about that we’ll be talking about later this year.”
Apple has instead been focused on the release of an augmented reality headset, the Vision Pro. The company put the device, which costs $3,500, on sale in mid-January and sold out of its first batch of about 200,000 headsets, according to analysts’ estimates. It will begin shipping the device on Friday.
“There’s already so much excitement behind this product,” Mr. Cook said. “We can’t wait for people to experience the magic for themselves.”
