Apple’s Quarterly Profit Down Because of Tax Payment in Europe

Sales for the iPhone maker were up 6 percent to to $94.93 billion. But a $14.4 billion tax bill cut profits that would have topped expectations.

Over the past month, Apple blanketed television with commercials about how its newest iPhone had exciting artificial intelligence capabilities even though the company was still working on many of the features it was pitching.

But Apple’s delay with A.I. didn’t cut into profits. Regulators did.

On Monday, the tech giant said sales of iPhones, iPads and subscription services like Apple Music had helped the company increase its quarterly revenue by 6 percent to $94.93 billion during the three months that ended in September.

The increased revenue didn’t translate into profit gains because Apple, which lost a court case in September, was forced to pay the European Union $14.4 billion in unpaid taxes. The one-time payment reduced its quarterly profit by 36 percent to $14.74 billion.

The results exceeded Wall Street analysts’ expectations for $94.58 billion in sales and, excluding the one-time tax payment, would have topped projections for $24.49 billion in profit. The company said it expected revenue to increase in the current quarter, which ends in December. Shares fell 2 percent in after-hours trading.

In September, Apple unveiled iPhones that could use its generative A.I. system, called Apple Intelligence, to sort messages, offer writing suggestions and use a more capable Siri virtual assistant. It released the first of those features this week, but other A.I. bells and whistles are coming out more slowly than expected.

Still, Apple said iPhone sales rose 5.5 percent to $46.22 billion during the quarter that ended in September.

During a call with analysts, Tim Cook, Apple’s chief executive, said that the company would add new A.I. features in December, including additional writing tools and the integration of ChatGPT. It will also expand to Britain, Canada and Australia. More languages will be available next April.

“It’s a very strong drum beat,” Mr. Cook said, adding that twice as many iPhone users have downloaded the latest software as a year ago.

The staggered rollout of Apple Intelligence features has tempered Wall Street’s expectations for the technology’s ability to quickly drive new iPhone sales.

“This isn’t the end of the world, but it suggests they’re not going to succeed in changing people’s behavior, who are holding onto their phone longer and longer,” said Charles Rinehart, chief investment officer at Johnston Investment Counsel, a financial advisory firm.

Apple is leaning on A.I. as it faces stiffer smartphone competition in China. Huawei sales have surged behind new models and interest in a phone that can be folded twice. There has also been an uptick in purchases of Xiaomi and Vivo phones, which have helped cut Apple’s share of the Chinese smartphone market to 13.5 percent from 14.5 percent, according to Counterpoint Technology Market Research.

In the face of that competition, Apple’s sales in China, its second-largest market, were flat at $15 billion. The company posted sales increases in every other geographic region, including the Americas, Europe, Japan and Asia Pacific.

Services, which include the sales of apps, Apple TV+ and Apple Pay, continue to be the growth engine for Apple’s business. The company is taking a cut of revenue from more than one billion subscriptions sold across iPhones and iPads. Sales of services in the quarter rose 12 percent to $24.97 billion, which was less than analysts had forecast.

The resilience of that business could be challenged next year. In August, a federal judge ruled that Google is a monopolist. The Justice Department may ask the judge to address that by preventing Google from paying Apple to be the default search engine on iPhones. Such a ruling could cost Apple about $20 billion a year in services revenue.

Apple could also face challenges should Donald J. Trump return to the White House. Mr. Trump has said he would impose tariffs on products made outside the United States. That would be tough for Apple, which makes its devices in Asia, with most iPhones made in China.

When a Wall Street analyst asked what Apple would do about that, Mr. Cook declined to answer the question, saying it was too speculative.

Apple’s other devices showed strength in the quarter. Sales of Macs rose 2 percent to $7.74 billion, while sales of iPads jumped 20 percent to $6.95 billion.

The company’s wearables business, which includes the Apple Watch and AirPods, was the only area of weakness in the period. It declined 3 percent to $9.04 billion.

This week, Apple released a new Mac Mini, an iMac and a MacBook Pro with more powerful chips to support Apple Intelligence. Last month, it released a new Apple Watch with a larger screen and new AirPods.

Apple’s call with analysts on Thursday was the last for its chief financial officer, Luca Maestri. He is stepping down from his position in January and will be replaced by Kevan Parekh, who has worked for the company for more than a decade, most recently as vice president of financial planning and analysis.

During Mr. Maestri’s decade in the role, Apple’s sales and profits nearly doubled, while the company’s market valuation rose from about $600 billion to nearly $3.5 trillion.

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