New York — Apple’s introduction of the iPhone 16 last month brought with it a new promise: enhanced artificial intelligence capabilities that, according to CEO Tim Cook, would “supercharge” the device’s functionality. Thursday’s earnings report offered the first indication of whether Apple’s gamble on AI integration has begun to pay off in terms of iPhone sales, and the early numbers suggest a modest but noteworthy impact.
For the third quarter, iPhone sales reached $46.2 billion, a 5.5% year-over-year increase that surpassed analysts’ cautious expectations. The report captures just over two weeks of sales data for the iPhone 16, which went up for preorder on September 13 and hit stores on September 20. Although brief, this snapshot offers a glimpse into initial demand for a model that Apple is counting on to rejuvenate a product line that has recently struggled to maintain momentum. Apple has experienced year-over-year revenue declines for four consecutive quarters, and the iPhone’s performance—its flagship product—is central to the company’s broader success.
Apple’s strategy with the iPhone 16 centers around Apple Intelligence, an AI-based platform that brings advanced new capabilities to the device, aimed at distinguishing it from previous models. For years, Apple has grappled with the challenge of motivating users to upgrade at the same rate they did in earlier iPhone cycles. With Apple Intelligence, the company hopes to change this, sparking what some have referred to as a “supercycle” of demand.
The third quarter’s iPhone revenue includes sales of prior models as well, but the release of the iPhone 16 appears to have bolstered growth. By comparison, last year’s iPhone 15 launch produced a more modest 2.8% year-over-year growth, suggesting that Apple’s AI integration may be striking a chord with users.
In total, Apple’s third-quarter revenue increased by 6% to $94.9 billion, outpacing Wall Street’s projections. Despite this revenue growth, the company’s profits dropped by 35%, a result that reflects Apple’s challenges in balancing revenue growth with cost management. Following the report, Apple’s shares fell about 1% in after-hours trading, reflecting a mixed response from investors.
On the earnings call, Cook highlighted early enthusiasm for iOS 18.1, noting its adoption rate is twice that of iOS 17.1—a clear indicator, he said, of strong interest in the new AI-powered features. The iPhone 16 initially shipped with a limited set of Apple Intelligence capabilities, such as advanced text editing tools and options for recording, transcribing, and summarizing conversations. Apple has announced that additional AI tools are slated for release in December with iOS 18.2, which may further encourage users to upgrade.
This phased rollout of Apple Intelligence may have had a dampening effect on initial iPhone 16 sales, as some users are likely waiting for the full suite of features before purchasing the device. Analysts at CFRA Research emphasized the importance of Apple’s early performance indicators for the iPhone 16, as well as the company’s guidance for the fourth quarter.
In a statement on Thursday, Cook emphasized that Apple Intelligence represents a significant advancement in user privacy while also enhancing the functionality of the iPhone 16 lineup ahead of the crucial holiday season. Industry watchers view the holiday quarter as particularly promising, with an estimated 300 million iPhones globally that have not been upgraded in more than four years, presenting a substantial opportunity for Apple.
China, one of Apple’s most important markets, has also drawn investor attention. Apple lowered iPhone prices in China earlier this year to counter mounting competition from local brands, but many analysts see the iPhone 16 as an opportunity for Apple to reclaim market share. Apple reported $15 billion in third-quarter revenue from China, which was largely flat year-over-year and fell slightly short of analysts’ $16.1 billion projection. Despite this, analysts maintain a positive outlook for the market, pointing to the strength of the iPhone’s brand and its dedicated customer base.
As Apple heads into the fourth quarter, the focus will be on whether the iPhone 16 can maintain its momentum and deliver the results investors hope to see. With the holiday season on the horizon, Wedbush analyst Dan Ives has expressed optimism, noting that many iPhone users are likely to upgrade after several years. Emarketer analyst Jacob Bourne suggested that while the gradual release of Apple Intelligence may moderate the immediate upgrade cycle, the combination of a strong services sector and healthy iPhone demand puts Apple in a promising position for the coming months.
