Apple shares (AAPL) rose 6% early Friday after the company reported better-than-expected profits, a less-than-feared sales decline and announced a new $110 billion share repurchase plan.
The iPhone maker reported second-quarter earnings per share of $1.53 on revenue of $90.8 billion late Thursday. Wall Street had expected EPS of $1.50 on revenue of $90.3 billion, according to analyst estimates compiled by Bloomberg.
Revenue from Apple’s Greater China region, which includes mainland China, Taiwan, Singapore and Hong Kong, fell 8% year over year to $16.37 billion, but was better than analysts’ expectations of $15.87 billion. Apple CFO Luca Maestri told Yahoo Finance’s Josh Lipton that the company saw growth in mainland China in the quarter.
Revenue from the company’s all-important iPhone was $45.96 billion, down from $51.33 billion in the second quarter of last year. Apple also approved an additional $110 billion for share buybacks and announced it would increase its dividend to $0.25 per share. Shareholder return plans have been a feature of Big Tech companies’ performance this year, with Meta initiating a dividend in February and Alphabet announcing plans to start paying one late last month.
Prior to Thursday’s earnings report, Apple’s shares had fallen 10% this year, a smaller decline than other big tech companies and the overall market.
Second-quarter Mac sales came in at $7.45 billion compared with the $6.79 billion estimate, while iPad sales reached $5.55 billion. Analysts had expected $5.91 billion. Wearables sales, which include AirPods, Apple Watch and Vision Pro, came in at $7.91 billion. Wall Street had expected $8.28 billion.
Another bright spot for Apple this quarter was that services revenue hit a record high of $23.87 billion, up from $20.91 billion last year. Analysts were expecting $23.28 billion.
Apple said in its earnings call that it expects revenue growth to be in the low single digits for the current quarter, with services revenue expected to grow in the double digits, roughly in line with the pace of growth in the first half of the company’s fiscal year.
“The results provide a strong launch pad for the company heading into fiscal 2024 performance as attention shifts to a looming AI-enabled smartphone upgrade cycle over the next few years,” JPMorgan analysts led by Samik Chatterjee wrote in a client note late Thursday. In response to the results, JPMorgan maintained its overweight rating on the stock and raised its price target to $225 per share from $210.
Apple is also gearing up for its Worldwide Developers Conference (WWDC) in June, where it will reportedly unveil the latest versions of its iOS, macOS, watchOS, iPadOS, and visionOS operating systems. One of the biggest announcements at the show is likely to be how Apple will integrate generative AI into its various products.
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During the company’s earnings call, CEO Tim Cook said, “We believe we have a differentiating advantage in this new era.”
“We believe a series of positive catalysts will drive the stock higher leading up to WWDC, where AAPL will detail its AI strategy across both hardware and services. We believe Apple can achieve AI upside without the AI capex we’ve seen from other companies,” Evercore ISI analysts led by Amit Daryanani wrote in a client note following the report. Evercore maintained its outperform rating and $220 price target on the stock.
Apple may be a relative latecomer to generative AI, with big tech rivals already rolling out their own products for consumer and business customers, but the company has been busy acquiring AI companies and building its own large-scale language models to bolster its AI efforts.
Maestri also told Yahoo Finance that the company is investing heavily in generative AI technology, and Bloomberg’s Mark Gurman reports that Apple is also considering partnering with OpenAI, Google and others to enhance its AI services.
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Contact Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter. Daniel Howley.
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