Apple Stock Slips After A Big Cut For iPhone 16 Orders
Challenges Ahead for Apple in the Smartphone Market
Table of Content
- Overview of Apple stock Movement
- Details on iPhone 16 Order Cuts
- Impact on Non-Pro Models
- Implications for Apple Intelligence
- Year-Over-Year Production Estimates
- Impact on iPhone Revenue
- Commitment to Evolving AI Capabilities
Shares of Apple (AAPL) fell by 2.16% on Wednesday after a report that the company has reduced production orders for its latest iPhone model by several million units.
Apple analyst Ming-Chi Kuo reported that the tech giant reduced iphone 16 orders by approximately 10 million units for Q4 2024 quarter of this year into the first half of 2025. Kuo noted that most of the reductions affected the non-pro models, but an estimate for iPhone 16 production for the sceond half of 2024 down to 84 million units, compared to the previous estimate of 88 million.
Kuo said that the reduction in iPhone orders indicates” no evidence yet that Apple Intelligence could boost iPhone shipments in the near term.” This suggests that Apple’s advancement in the AI and related features are not expected to significantly drive the demands for iphones in the short term.
Apple Intelligence refers to Apple’s suite’s of artificial intelligence tools, which encompass both on-device AI capabilities and the cloud-based solutions. These tools are specifically designed to boost user experiences through features like improve Siri functionality, image recognition, personalized recommendations, and predictive text with the ability to process data locally on devices or leverage cloud computing for more complex tasks.
Although Apple launched its new iPhone line last month, the initial software updates introducing Apple Intelligence to users of its devices isn’t scheduled until later this month. Additionally, some advanced features are expected to roll out later in the year, delaying the full integrations of Apple’s AI capabilities across its devices.
Navigating Change: Apple’s iPhone Production Cuts and Future Revenue Outlook
Kuo reported that total iPhone production estimates for the fourth quarter of this year, as well as the first and second half of the next year, are all down year-over-year. The updated estimates are 80 million units for Q4, 45 million units for the first half of 2025, and 39 million units for the second half. These figures represent decreases from the previous estimates of 84 million, 48 million, and 41 million units, respectively.
Kuo noted that iPhone revenue for Apple’s fourth quarter “may not fully reflect the impact of production cuts, as the gap between production and sell-through in Q4 2023 was larger than in Q4 2024. Additionally, the product mix in Q4 2024 is more favorable, with increased production of the Pro Max model during September and October. This suggests that despite the production reductions, revenue could remain as stronger due to the higher sales of premium models.
However, Kuo warned that iPhone revenues will likely “come under pressure” in the first half of next year due to a year-over-year decline in shipments and a “less favorable product mix” after Apple launches the iPhone SE4. Mass production of the iPhone SE4 is set to begin in December, with an expected output of 8.6 million units between then and the first half of 2025, which could impact overall revenue due to its lower price point compared to premium models.
In an interview with The Wall Street Journal, Apple’s head of software, Craig Federighi, said the company’s AI tools represent a long-term strategy. He indicated that while immediate impacts may not be evident, Apple has been committed to evolving its AI capabilities to boost user experiences over time.
“This is a big lift, and we feel like we want to get it right,” Federighi stated, highlighting Apple’s commitment to ensuring that its AI tools are developed effectively and meet the high standards expected by users.
