Apple Conference Call: Still bullish on the Chinese market, has invested in AI but progress remains undisclosed

"China" and "AI" were the two key points emphasized during Apple's post-earnings conference call, and Apple CEO Tim Cook expressed optimism about both.

After the U.S. stock market closed on February 1st, Apple delivered better-than-expected Q4 results, with record-high EPS and sales that exceeded market expectations. Service revenue reached a new high for the fourth consecutive quarter. However, revenue from the third-largest market, Greater China, declined by approximately 13% YoY, which was higher than expected.

During the conference call following the release of the earnings report, Cook rarely responded to Apple's progress in the field of artificial intelligence. He stated:

"We will continue to invest a significant amount of time and energy in the field of artificial intelligence."

Long-term "significant opportunities" in China

The Q4 earnings report showed that Greater China, which contributed 20% of Apple's annual revenue, generated $20.82 billion in revenue for the quarter, significantly lower than analysts' expectations of $23.5 billion. This was the weakest performance for a December quarter since the beginning of 2020.

Greater China is Apple's third-largest sales market, following North America and Europe. As the core business with sales far exceeding other hardware products, Apple's health, especially its sales trend in Greater China, is of particular concern.

Apple CFO Luca Maestri stated to the media that the company is not satisfied with its performance in Greater China, but also recognizes that China is the most competitive smartphone market in the world. "In the long run, we still see significant opportunities in China."

In response to questions about the decline in business in China, Cook provided data:

"The number of Apple users upgrading to new Apple products in China has shown a steady increase year by year." "In this quarter, Apple's smartphones accounted for four out of the top six smartphone models in China."

An analyst asked Cook whether he believed Apple could recover its revenue growth in China. In response, Cook said:

"The number of Apple users upgrading in China has increased." "Apple is still one of the best-selling Apple products in the China region."

Developing AI, but no discussion for now

In recent years, compared to other giants such as Microsoft, Google, and Meta, who have actively laid out the AI track, Apple has seemed somewhat "low-key."

In the face of numerous market speculations, during the conference call, Cook half-jokingly and half-confirmed that Apple may announce its artificial intelligence plans "later this year."

Although no further details were revealed, Cook's statement clearly demonstrates Apple's optimistic prospects for applying AI. However, he seems reluctant to "announce anything too early" before releasing new AI products. Cook said:

"Looking ahead, we will continue to invest in these technologies and other technologies that will shape the future, including artificial intelligence."

"I am pleased to share more details about our work in this field later this year."

"I just want to say that I believe Apple has tremendous opportunities in generative AI and the entire AI field, but there is no need to reveal more details to avoid being 'too forward'."

Some media believe that although Cook's speech did not contain much specific information, it does indicate that Apple intends to participate in the AI competition and compete with Microsoft, Google, Amazon, and others.

Earlier reports stated that Apple is expected to use AI to make significant improvements to its voice assistant Siri and introduce AI features in Apple's operating system, including smart replies in messages and playlist recommendations in Apple Music.

"Historic" product Vision Pro brings opportunities to enterprises

It is worth noting that on the day after the financial report was released, Vision Pro will be officially launched for sale. According to reports, Apple has already sold more than 200,000 units of Vision Pro in the pre-sale phase.

Cook believes that the official release of Vision Pro is "a historic day as we enter the era of spatial computing", and he said:

"This is the result of the efforts of many people at Apple over the years, and it really takes the entire company's effort to get to this point."

During the conference call, Cook also gave a small advertisement for this "groundbreaking product," saying:

"People who want to try this device for free can go to participating Apple stores for product demos starting from Friday, first come, first served."

It is reported that this product utilizes 5,000 patents. Cook stated that he would not compare the development trajectory of this headset with any other Apple product:

"Each product has its own development pattern."

At the same time, Cook emphasized the "business opportunities brought by Vision Pro." He stated that major companies such as Walmart, Nike, SAP, Vanguard, and Bloomberg plan to purchase Vision Pro, and Walmart and SAP plan to incorporate the product into their workflows.

"Flagship product" performs well, EU regulations harm product ecosystem

Apple's Q4 financial report shows that Apple's revenue, which accounts for half of its total revenue, increased by 6% YoY, indicating a positive sales momentum in the first quarter after the release of Apple 15.

According to Cook, in the fourth quarter, the number of users choosing to upgrade to the new Apple 15 series reached a historic high.

In the face of antitrust pressure from the European Union, Cook also mentioned a series of historic changes that Apple is making to its App Store products during the conference call. Cook said:

"Apple places great emphasis on privacy, security, and usability."

"In the past, we have made every effort to develop as much as possible in the popular ecosystem field. However, in the future, we will not be able to provide related services to the best of our ability due to regulatory compliance."

Maestri pointed out that these changes will only affect users in the European Union market, which accounts for "approximately 7% of our global App Store revenue."