Apple's killer quarter buys more time for the company to deliver clarity on AI

Apple dered a solid June quarter Thursday evening, and the stock moved higher

However, the lack of any real artificial intelligence strategy tempered investor enthusiasm

The stock remains an AI "show me" story — and in a market currently being powered by the AI trade, that's all anyone really cares

Earnings per (EPS) increased 12% in the quarter to $1.57, better than the $1.43 consensus estimate, according to LSEG

Why we own it Apple's dominant hardware and growing services es vide a deep competitive moat and plenty of bundling opportunities

Management's net cash-neutral strategy vides confidence that free cash flow will continue to fund dividends and buybacks

Competitors: Samsung, Huawei, Xiaomi, OPPO, Dell , and HP Inc

Apple once again achieved a new all-time high for its installed base of active devices in all duct and across all geographic regions

Services, meanwhile, set a new record with better-than-expected gross margin performance

Remember, a small miss on services revenue in the March quarter hit the stock pretty hard at the time

So, it was nice to see services turn

On the call, Cook said the company saw growth accelerate in the "vast majority of " that Apple tracks, including Greater China and many emerging

Moreover, he noted that the company set June quarter revenue records in over 24 countries and regions, "including the U.S., Canada, Latin America, Western Europe, the Middle East, India and South Asia." Regarding China, it's that the Chinese consumer still loves Apple, with iPhone sales accelerating sequentially to set a new record installed base

Mainland China set a June quarter record for iPhone upgrades, and according to consumer data tracking service Worldpanel, formerly Kantar, the iPhone held the top three spots in urban China

MacBook Air was the top-selling laptop in China during the June quarter, while the Mac Mini was the top-selling desktop there

Cook also touched on AI, reaffirming his view that it is "one of the most found nologies of our lifetime." He added that Apple Intelligence is being integrated across the company's various platforms, and the company is "significantly growing" its investments in the nology

There, unfortunately, was not much of an beyond what we already know

However, Cook said the team continues to make gress on a more personalized Siri, with plans for a launch of the d personal assistant sometime next year

He also said, "We're open to M & A that accelerates our roadmap." That statement did not directly address reports back in June that Apple held internal discussions whether to make an offer to buy AI startup Perplexity

But Cook saying that Apple is open to bringing in help is a welcome sign

That said, it's a relatively muted move, given the positive results and the stock's year-to-date decline of 17% as of Thursday's close

In our view, this is ly a reflection of investors being hesitant to get more optimistic on the stock until we get more clarity on Apple's AI initiatives

While we fully understand that view, we too want more clarity on the road map for Apple Intelligence and would love to one day wake up to news that Apple has struck a deal to acquire Perplexity, results this are a reminder of why investors should stick with Apple though times this, even if it's not yet time to recommend the stock as a buy

Apple is rarely the first to adopt new , choosing instead to take its time, see what's out there and how consumers are responding, and then release a more refined version

Should that be the case again this time, and Apple does indeed come to market with the kind of AI features we should all expect from a company of this caliber, then it can instantly push the to its legion of loyal users with a simple software and become a serious player in personal AI

We know Meta Platforms is looking to create a more personal AI, however, given the deep connection Apple users have with their iPhone and other devices, we still think Apple has a real opportunity to lead here

The company just needs to execute

While AI execution, thus far, has left something to be desired, betting against Cook over the long term has truly been a loser's gamble

We think that will ve true again

However, until we do get more clarity on the AI roadmap and a timeline for a real upgrade to turn Siri into a conversational, blem-solving digital assistant, we have no choice but to maintain our hold-equivalent 2 rating

Growth was seen in all geographic segments, with double-digit percentage growth in emerging including India, the Middle East, South Asia, and Brazil

Apple dered a June quarter record for iPhone, Mac, and Apple Watch upgrades

Services achieved a new all-time sales record, growing double digits in both developed and emerging a

Cloud services sales accelerated sequentially to a new all-time revenue record, driven by strength in iCloud

Apple TV+ viewership was up double digits versus the year-ago period

App Store revenue was also up double digits year over year, setting a June quarter record

Additionally, Parekh called out a new all-time high for both transacting and pair accounts

Outlook While Apple doesn't vide formal guidance, management said that September quarter revenue is expected to increase by mid-to-high single digits versus the year ago period

That sounds in-line to better than the 3.3% year-over-year growth the Street was looking for, according to LSEG

So, this also appears to be in-line to better than expected

Gross margin for the September quarter is expected to be in a range of 46% to 47%, which would be better than the 45.7% expected, according to FactSet

Management expects September quarter operating expenses to be between $15.6 billion and $15.8 billion, a bit higher than expectations of $15.4 billion, according to FactSet

This guidance assumes no deterioration in macroeconomic conditions and no changes in global tariff rates, policies or enforcement

It also assumes Apple's revenue agreement with Google remains intact

The king's ransom paid Apple for Google priority has been called into question due to the government's antitrust case against Alphabet

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