SAN FRANCISCO – Apple’s quarterly results and forecast beat modest expectations on May 2, as the iPhone maker unveiled a record share buyback programme, sending its stock up almost 7 per cent in extended trade.
Apple increased its cash dividend by 4 per cent and authorised an additional programme to buy back US$110 billion (S$149 billion) of stock. The buyback is the largest in the company’s history, according to Investing.com analyst Thomas Monteiro.
Apple’s quarterly revenue fell, but less than analysts had expected, and chief executive Tim Cook said revenue growth would return in the current quarter.
The results and guidance suggest the company may be regaining its footing in the smartphone market, despite stiff competition and regulatory challenges.
Apple said fiscal second-quarter revenue fell 4 per cent to US$90.8 billion, beating the average analyst estimate of US$90.01 billion, according to LSEG data.
For Apple’s current quarter, which ends in June, Mr Cook told Reuters that the iPhone maker expects “to grow low-single digits” in overall revenue. Wall Street expected 1.33 per cent revenue growth to US$82.89 billion, according to LSEG data.
Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling 10 per cent in 2024 as it struggles with weak iPhone demand and tough competition in China.
Apple expects current-quarter services and iPad revenue to grow by double digits, chief financial officer Luca Maestri told analysts on a conference call. The company expects gross margins of between 45.5 per cent and 46.5 per cent for the fiscal third quarter.
Apple faces a raft of challenges across its business. Smartphone rivals such as Samsung Electronics have introduced competing devices aimed at hosting artificial intelligence (AI) chatbots.
On the regulatory front, Apple’s services business, which contains its lucrative App Store and was one of the few areas of growth in the fiscal second quarter, is under pressure from a new law in Europe.
In the US, the Department of Justice in March accused Apple of monopolising the smartphone market and driving up prices.
For the fiscal second quarter, iPhone sales fell 10.5 per cent to US$45.96 billion, compared with analyst expectations of US$46 billion.
Apple executives said in February that the year-ago fiscal second quarter had benefited from a US$5 billion surge in iPhone sales as the company caught up from supply-chain snarls during Covid-19 pandemic lockdowns.
Excluding that one-time phenomenon, iPhone sales were down only slightly as the company’s signature product faces stiff competition. In China, Huawei Technologies has gained market share.
Mr Cook said iPhone sales still experienced “growth in some markets, including China”.
Apple’s revenue decline in China was not as steep as analysts expected, with Greater China sales of US$16.37 billion for the fiscal second quarter that ended March 30, down 8.1 per cent and above analyst expectations of US$15.59 billion, according to data from Visible Alpha.
Apple has said little about its product plans for AI, the technology on which rivals Microsoft and Alphabet’s Google are placing huge bets. The company started ramping up research and development spending in 2023, and Mr Cook said the company has spent more than US$100 billion on R&D in the past five years.
“We continue to feel very bullish about our opportunity in generative AI, and we’re making significant investments,” he said.
“We’re looking forward to sharing some very exciting things with our customers” at events later in 2024, Mr Cook said.
Mr Monteiro of Investing.com said Apple’s massive share buyback can help buy it time and trust with investors as it works to bring AI into its products.
“It’s certainly a great time to resort to this strategy as, on the one hand, the stock remains relatively fairly priced, and, on the other hand, it needs to garner solid support for a structural shift that may very well take several quarters to play out,” he said in a note.
Apple’s quarterly earnings per share was US$1.53, above Wall Street estimates of US$1.50, according to LSEG data.
Sales in Apple’s services segment, which also represents Apple Music and TV offerings, rose to US$23.87 billion, above analyst expectations of US$23.27 billion, according to LSEG data.
Analysts had expected Mac sales to decline in the fiscal second quarter, but they instead grew to US$7.5 billion, compared with estimates of US$6.86 billion, according to LSEG data.
“They were really driven by the strength of the new MacBook Air that’s powered by the M3 chip,” Mr Cook said. “About half of our MacBook Air buyers during the quarter were new to the Mac.”
The company’s sales in the iPad segment declined to US$5.56 billion, below analyst expectations of $5.91 billion.
In the company’s wearables segment, which represents sales of Apple Watches and AirPods headphones, sales fell to US$7.91 billion, compared with analyst estimates of US$8.08 billion, according to LSEG data. REUTERS
