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Apple (NASDAQ:AAPL) is in for a rough ride in 2025 as it grapples with a sharp decline in its Chinese market share. In the key December quarter, iPhone sales fell a staggering 18.2%, knocking Apple down to third place in Chinabehind Huawei and Xiaomi (XIACY). This downturn isn't just a one-off; local brands like Vivo and Huawei are gaining ground as Chinese consumers increasingly turn to domestic options. The result? Apple's slice of the Chinese pie shrank to just 15% in Q4 2024, and it's looking like this trend will continue.
However, Apple is still showing some muscle in other areas. The company is expected to report a solid 3.9% year-over-year revenue growth for its fourth quarter, largely thanks to its burgeoning services sector. The boost from Apple Music, Apple Care, and other services could help Apple offset the iPhone sales slump. Analysts predict that services will make up a quarter of total revenue in 2025, which is a big win for Apple as it tries to diversify beyond the iPhone.
But don't get too comfortable. Even with its growing services arm, Apple isn't out of the woods yet. Analysts are forecasting a 6% drop in iPhone shipments for the first half of 2025, and the company's ambitious AI project, Apple Intelligence, just hit a major speed bump with a malfunction in one of its key features. As Apple fights to keep its footing in China, it will need to double down on emerging markets and services to stay competitive.
This article first appeared on GuruFocus.