Apple’s best year yet comes with a puzzling weak spot

It’s been a good news/bad news few weeks for Apple.

The company just closed its fiscal year with a record $112 billion in net income and quarterly revenue of $102.5 billion, per its October 30 earnings call. Both figures were ahead of Wall Street expectations.

“We are incredibly excited about the strength we’re seeing across our products and services and we expect the December quarter’s revenue to be the best ever for the company and the best ever for iPhone,” Apple CEO Tim Cook said on the call.

Management is guiding for 10% to 12% year-on-year revenue growth in the December quarter, well above analyst forecasts of about 6%, on the back of double-digit iPhone revenue growth and resilient gross margins of 47-48%, despite elevated tariff costs.

Apple is entering the holidays with a record profit year, a bullish sales forecast, and a $4 trillion market valuation, as reported by Reuters. The company also shared on its earnings call that it had achieved all-time revenue records in the Americas, Japan, Europe, and China.

Then, yesterday, despite the strong financials, the company announced rare layoffs on November 24, letting “dozens” of people go due to a reorganization of its sales department, according to Bloomberg.

“To connect with even more customers, we are making some changes in our sales team that affect a small number of roles,” a spokesperson for the Cupertino, California-based company said in the statement to Bloomberg. “We are continuing to hire and those employees can apply for new roles.”

iPhone 17 drives an upgrade wave

The iPhone 17 series is outpacing last year’s iPhone 16 by roughly 14% in key markets, such as the United States and China, according to a Counterpoint Research report. It may be that after several lackluster upgrade cycles, more people are hungry to get the latest, greatest model.

Apple kept pricing for the new model largely in check while adding more features to the base models, according to the company’s website, a strategy that appears to be drawing in value-conscious buyers even as trade tensions and tariffs linger in the background.

A brief history of the iPhone

2007 — iPhone introduced: Steve Jobs unveils the first iPhone with multitouch and mobile internet features that redefine smartphones.
2008 — App Store launch: The App Store opens, creating the modern app ecosystem.
2010 — iPhone 4: First Retina display and major redesign; FaceTime introduced.
2011 — Siri arrives: iPhone 4S launches with Siri, bringing voice assistants to the mainstream.
2014 — iPhone 6 & 6 Plus: First large-screen iPhones (4.7″ and 5.5″); huge sales and industry shift.
2017 — iPhone X: Major redesign with edge-to-edge OLED and Face ID; removes Home button.
2019 — iPhone 11 Pro: First triple-camera system, boosting computational photography.
2020 — iPhone 12: Introduces 5G across the lineup; flat-edge design returns.
2023 — iPhone 15 Pro: Moves to USB-C, adds the Action Button, and debuts Apple’s A17 Pro chip.
2024 — iPhone 16 + Apple Intelligence: Deep integration of on-device and cloud-assisted AI marks Apple’s shift toward AI-first features. Source: Make Use Of

Apple faces pressure from China

Despite the strong global picture, revenue from China remains under pressure, reflecting tougher competition from local brands and regulatory headwinds that have weighed on Apple’s growth in the world’s largest smartphone market.

Cook has signaled confidence that Chinese sales will return to growth in the December quarter, pointing to significantly higher store traffic and early momentum behind the new iPhone models as signs that the worst of the slump may be easing, he told Reuters .

Beyond hardware, Apple’s Services division, which includes the App Store, iCloud, and Apple Pay, has crossed the $100 billion annual revenue threshold for the first time, according to the October 30 earnings call. That means the division earns more than Tesla, Pepsi, or Disney.

At the same time, easing tariff pressures, including a U.S. move to cut a key import levy that had hit Apple earlier in the year, are helping management keep gross margins elevated, even as it absorbs more than a billion dollars in recent tariff-related costs, NBC News reported.

Apple is now in the $4 trillion club

Apple’s surging share price, up more than 30% since late summer, has planted the company into the elite club of firms worth over $4 trillion, alongside Nvidia and Microsoft, cementing investor belief that its device-and-services model still has room to run.

Yet the valuation milestone also intensifies scrutiny of Apple’s slower progress in artificial intelligence, where delayed Siri upgrades and pulled-back features have compelled the company to promise increased R&D spending to close the perceived gap with technology rivals.

iPhone Air: lots of buzz but looking like a bust

In another bit of bad news, one of Apple’s boldest new devices — the iPhone Air —stumbled out of the gate. The phone was hyped for months, and reportedly had a lot of interest, but it’s not selling well, The Financial Times reported.

It’s the thinnest iPhone yet and the company’s most radical smartphone redesign in years and even drew a million product-page views at launch.

Still, early sales have significantly undershot internal hopes, pushing Apple to slash production plans after the model sold only about a third of its most optimistic expectations, per The Times.

iPhone Air pricing misstep and feature trade‑offs

Analysts say the iPhone Air has been squeezed into an “awkward” middle ground: At $999, it sits just $100 below the iPhone 17 Pro, yet it sacrifices camera versatility and audio hardware to achieve its 5.64mm profile, leaving many buyers to choose either a cheaper base model or a fuller‑featured Pro instead.

“The Air is a limited-capability phone that we think is a trial run in preparation for the foldable,” Wamsi Mohan at Bank of America told The Financial Times.

Web analytics data from SimilarWeb show that while the Air’s product pages attracted heavy traffic, its conversion rate lagged other models by roughly a third, per the Financial Times reporting, suggesting that the design intrigue did not overcome concerns about value and everyday usability.

Despite the tepid response, analysts like Mohan believe the Air may be a strategic test bid rather than a failed experiment, a step toward a more radical foldable iPhone that industry watchers expect as soon as next year.

In other words, Apple may be using the Air to gauge consumer appetite for slimmer, lighter devices.