Apple Faces Challenges in China as December Earnings Loom

CUPERTINO, Calif. — Apple Inc. is set to report its December-quarter earnings Thursday, marking its largest quarter of the year, driven by holiday sales and the first full quarter of new iPhone releases. However, analysts are closely watching signs of weakening demand in China and the impact of Apple’s artificial intelligence features, which are not yet available in the region.

Loop Capital analyst Ananda Baruah noted in a recent report that iPhone 16 demand has softened, despite the introduction of iOS 18 and its generative AI features. “We’re again looking for iPhone units to decline for the fourth consecutive year,” Baruah wrote, downgrading Apple to a hold rating. Apple does not disclose unit sales or provide traditional guidance, leaving analysts to rely on data points from new CFO Kevan Parekh during Thursday’s earnings call.

LSEG estimates Apple’s revenue will grow by 3.8% annually to $124.13 billion, aligning with Apple’s October projection of “low- to mid-single digit” sales growth. However, concerns persist over Apple’s performance in mainland China, where consumers are increasingly favoring domestic brands. Goldman Sachs analyst Michael Ng highlighted this trend in a Jan. 23 note, stating, “We believe that a major driver of growing competition within the smartphone market is due to growing preference for domestic brands within China.”

Despite these challenges, Apple’s services business, which includes Apple TV+ and device warranties, could provide a bright spot. Barclays analysts predict services revenue could grow by up to 14% annually, potentially offsetting weaker iPhone sales. Investors will also be looking for updates on Apple’s AI strategy and its plans for the March quarter, with LSEG consensus estimates projecting $1.66 in earnings per share on $95.46 billion in revenue.