Here are the takeaways from today's Morning Brief. sign up Every morning you will receive the following message in your inbox:
As Big Tech companies ramp up spending and build infrastructure for the coming wave of AI, Apple continues to make shifts of its own.
iPhone sales, which account for about half of the company's sales, have been declining, with Thursday's quarterly report showing sales fell another 10%.
However, the company's quarter was well received thanks to its services business. The services business has emerged as a bright spot, providing the world's second-largest company with continued profit margin growth.
The services division, which includes the App Store, Apple Pay, Apple TV+, and Apple Music, posted a 14% revenue increase in the company's second quarter.
And as CFO Luca Maestri said on Thursday night's earnings call, these gains, along with some cost reductions, pushed the company's gross margin to a 12-year high, up from 45.9% last quarter. This contributed to raising the percentage to 46.6%.
As this week's chart shows, the company has been increasing its profit margins for years, in the words of analysts.
Efficiency has emerged as a new theme in technology over the past year, after the industry went through a post-pandemic talent growth phase with a shift toward profitability and leanness.
And now, with AI fueling an investment boom, growth mode is back in at least some parts of the sector.
During Apple's earnings call, CEO Tim Cook denied making any announcements about AI and gave investors no details about the company's plans or spending.
But the general idea is that they do indeed spend less than Magnificent's peers.
As Evercore analysts wrote Thursday, investors should appreciate that “Apple is executing AI in a more capital-efficient manner than other tech companies.” Spend less and produce more, unlike, say, meta.
And perhaps this is part of the company's AI strategy, which is not consistent with its long-standing philosophy of not rushing product categories. Rather, Apple preferred to be a thoughtful latecomer without bowing to trends.
Computers, MP3 players, phones, tablets, headphones, VR headsets. Most of them were successful for Apple. All were “slow” compared to their competitors.
Unlike the ferocious investments that its peers are making in AI, Apple's services business relies on its shiny brand and walled ecosystem.
We expect Apple's pending AI strategy to leverage this approach, continue to fuel the company's margin boom that has defined the company's life over the past few years, and differentiate it from its peers. .
ethan wolfman He is a senior editor at Yahoo Finance and runs the newsletter. Follow him on Twitter @ewolffmann.
