Apple Set to Report Strongest iPhone Sales in Four Years, Thanks to Google's Gemini Deal

Apple is set to report its strongest iPhone sales growth in four years on Thursday, driven by robust demand for its premium Pro models as it prepares to roll out artificial intelligence features developed with Google's technology. Investors, however, will look for comments from the company on how it aims to navigate a global memory chip crunch that is likely to raise its cost and weigh on margins.

The decision to use Alphabet-owned Google's Gemini for a revamped Siri and other Apple Intelligence features is the biggest shift to date in the company's AI strategy. Wall Street has largely lauded the move, saying it allows Apple to tap into its installed base of more than two billion devices without the hefty spending required to develop cutting-edge models.

The Google deal "should demonstrate to the market the iPhone will remain the consumer device of choice for accessing new AI tools", Goldman Sachs analysts said. Even without the AI revamp - the technology has not yet been a real driver of smartphone demand - sales of the latest iPhone 17 series surged in the last three months of 2025, typically the strongest quarter for Apple.

In China and developing markets, Apple drew customers with the refreshed camera design and higher storage capacity of the latest Pro devices. The company led the global smartphone market last year with a 20% share, according to research firm Counterpoint, up from 18% in 2024.

Overall, Apple is expected to report that iPhone sales rose 13.8% in its October-December fiscal first quarter, according to analysts polled by LSEG. That would mark the strongest growth in more than four years. Total revenue likely increased 11.4% to a record $138.43 billion, aided by a 14.1% jump in Apple's services business. In Greater China, sales likely jumped about 15%, according to Visible Alpha data.

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Still, Apple ended last year with just an 8.5% rise in its stock price, somewhat missing out on an AI-powered rally that drove a 14.7% gain at Microsoft and Alphabet's 65.3% jump. Some investors believe Apple can make money from AI without the massive infrastructure investments pledged by its Big Tech rivals.

"Apple can probably generate a positive return on very little AI investment, thanks to its distribution," said Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund, which holds Apple stock.

While overall revenue grows, Apple's services segment, which houses the App Store, could see challenges amid intense European regulatory scrutiny into its payment practices. The company has been fined hundreds of millions of euros across the continent for abusing its dominant position in the mobile app market. Going into fiscal second quarter sales, though, tight memory chip supplies could increase Apple's costs for building iPhones, Rosenblatt Securities said in a note.

"But Apple has shown great skill in navigating supply chain disruption," the firm said in a note. “We expect the playbook to include using its market-leading scale to pressure suppliers for concessions and to lock in supplies.” The memory chip crisis is expected to hit demand for consumer electronics, including smartphones, personal computers and gaming consoles, with the impact likely to be more pronounced on low-to-mid-range devices.

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