Apple unveils record $110 billion buyback as results beat expectations

Apple’s quarterly results and forecasts exceeded modest expectations today as the iPhone maker unveiled a record stock buyback program, sending the stock up nearly 7% in extended trading.

Apple increased its cash dividend by 4% and approved an additional $110 billion share buyback program. According to Investing.com analyst Thomas Monteiro, the buyback is the largest in the company’s history.

Apple’s quarterly revenue fell, but less than analysts expected, and CEO Tim Cook said revenue growth would return in the current quarter.

The results and guidance suggest that the company may regain its position in the smartphone market despite intense competition and regulatory challenges.

Apple said fiscal second-quarter revenue fell 4% to $90.8 billion, beating the average analyst estimate of $90.01 billion, according to LSEG data.

For Apple’s current quarter, which ends in June, Cook told Reuters that the iPhone maker expects total revenue “to grow in the low single digits.” Wall Street expected revenue growth of 1.33% to $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. This year, they are down 10% as the company struggles with weak iPhone demand and fierce competition in China.

Apple expects services and iPad revenue to grow by double digits this quarter, CFO Luca Maestri told analysts on a conference call. The company expects gross margins between 45.5% and 46.5% for the fiscal third quarter.

Apple faces a series of challenges across its business. Smartphone rivals such as Samsung Electronics have introduced competing devices aimed at hosting chatbots with artificial intelligence.

On the regulatory front, Apple’s services sector, which includes the lucrative App Store and was one of the few growth areas in the fiscal second quarter, is under pressure from a new law in Europe. In the United States, the Justice Department accused Apple in March of monopolizing the smartphone market and driving up prices.

For the second fiscal quarter, iPhone sales fell 10.5% to $45.96 billion, compared to analysts’ expectations of $46 billion. Apple executives said in February that its fiscal second quarter from a year ago had benefited from a $5 billion increase in iPhone sales as the company caught up on supply chain woes during pandemic lockdowns.

Excluding this one-time phenomenon, iPhone sales fell only slightly as the Cupertino, California company’s signature product faces stiff competition. In China, Huawei Technology has gained market share.

Cook said iPhone sales were still “growing in some markets, including China.”

Apple’s sales decline in China wasn’t as steep as analysts expected, with Greater China sales of $16.37 billion for the fiscal second quarter ended March 30, down 8.1% and above expectations. analysts of $15.59 billion, according to data from Visible Alpha.

Apple has said little about its product plans for artificial intelligence, the technology on which rivals Microsoft and Alphabet’s Google are placing big bets. The company started ramping up research and development spending last year, and Cook said the company has spent more than $100 billion on R&D over the past five years. “We remain very optimistic about our opportunities in generative AI and we are making significant investments,” he said. “We look forward to sharing some very exciting things with our customers” at events later this year, Cook said.

Investing.com’s Monteiro said Apple’s massive stock buyback could help buy time and confidence from investors as it works to bring AI into its products.

“It is certainly a good time to resort to this strategy, as on the one hand the stock remains relatively reasonably priced, and on the other hand it needs to gather solid support for a structural shift that could very well take several quarters. play,” he said in a note.

According to LSEG data, Apple’s quarterly earnings per share were $1.53, ahead of Wall Street estimates of $1.50.

Revenue in Apple’s Services segment, which also represents Apple’s music and TV offerings, rose to $23.87 billion, above analysts’ expectations of $23.27 billion, according to LSEG data.

Analysts had expected Mac sales to decline in the second fiscal quarter, but instead grew to $7.5 billion, compared with estimates of $6.86 billion, according to LSEG data.

“They were really driven by the power of the new MacBook Air, which is powered by the M3 chip,” Cook said. “About half of our MacBook Air buyers during the quarter were new to Mac.”

The company’s revenue in the iPad segment fell to $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, revenue fell to $7.91 billion, compared with analyst estimates of $8.08 billion, according to LSEG data.

Additional reporting by Noel Randewich in Oakland, California.