Apple’s iPhone sales surge to new quarterly high despite early missteps in artificial intelligence

Apple’s iPhone sales soared to a new quarterly record during the holiday season, despite artificial intelligence blunders that prompted the technology trendsetter to get a helping hand from Google.

The October-December results announced Thursday reflect the allegiance of Apple’s fans, who eagerly snapped up the latest iPhone 17 models even though the company still hasn’t delivered on its 2024 promise to smarten up the device’s Siri assistance with AI.

Apple tried to offset its AI miscues with a new “liquid glass” design for the iPhone 17 and older models installed by way of a free software upgrade released last September. That formula helped produce iPhone sales of $85.3 billion, a 23% increase from the same time in the previous year. It marked Apple’s highest iPhone sales for a three-month period since the device’s debut in 2007.

“The demand for iPhone was simply staggering,” Apple CEO Tim Cook crowed during a conference call with analyst while predicting the device will become a cutting-edge platform for AI.

The iPhone’s robust performance propelled Apple to a profit of $42.1 billion, or $2.84 per share for the quarter, a 16% increase from the previous year. Total revenue also rose 16% from the previous year to $143.8 billion. Both the earnings and sales exceeded the analyst projections that steer investors.

Apple’s shares rose by about 1% in extended trading after the numbers came out. But the stock price still remains slightly down so far this year, and isn’t that much higher from where it finished at the end of 2024.

Zacks Investment Research analyst Ethan Feller said the worries about Apple’s late start in AI appeared to have been overblown and now appears well positioned to roll out more of the technology “as a feature that scales naturally across its ecosystem,” which also includes iPads, Mac computers and smartwatches in addition to iPhones. Apple said more than 2.5 billion active devices worldwide are now running on its various operating systems.

The Cupertino, California, company will try to sustain the momentum by finally releasing a batch of delayed AI features, including an Siri upgrade that is supposed to make the assistant more conversational and versatile.

To pull it off, Apple is tapping into Google’s latest AI model, Gemini 3, in a tacit acknowledgment of its own shortcomings in a technology that’s widely considered to be the industry’s biggest breakthrough since the iPhone’s introduction.

Despite its AI deficiencies, the iPhone ended last year as the worldwide sales leader with a nearly 20% market share that ranked just ahead of Samsung, according to the research firm International Data Corp.

In a show of its confidence, Apple forecast its revenue for the January-March period will climb by at least 13% from last year, above the roughly 10% bump that analysts had been anticipating.

The AI boom is confronting Apple with another challenge: a shortage of memory chips that for smartphones and laptops amid the voracious demand for the same processors in the massive data centers that are being built to power AI features.

Besides threatening to curtail iPhone production, the memory chip crunch is also driving up their prices — a factor that has already been eroding Apple’s profit margins. That financial pressure could eventually push Apple to raise the prices on iPhones and other products to help offset the rising memory chip costs

“We do continue to see market pricing for memory increasing significantly,” Cook told analysts Thursday. “As always, we’ll look at a range of options to, to deal with that.”