Apple unveils record $110B stock buyback as earnings beat low expectations

 

Apple's (AAPL.O)

, opens new tab quarterly results and forecast beat modest expectations on Thursday, as the iPhone maker unveiled a record share buyback program, sending its stock up 6% in extended trade.

Apple increased its cash dividend by 4% and authorized an additional program to buy back $110 billion of stock. The buyback is the largest in the company's history.

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

Apple's (AAPL.O), opens new tab quarterly results and forecast beat modest expectations on Thursday, as the iPhone maker unveiled a record share buyback program, sending its stock up 6% in extended trade.

Apple increased its cash dividend by 4% and authorized an additional program to buy back $110 billion of stock. The buyback is the largest in the company's history.

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

Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling 10% this year 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, CFO Luca Maestri told analysts on a conference call. The company expects gross margins of between 45.5% and 46.5% for the fiscal third quarter.

Apple faces a raft of challenges across its business. Smartphone rivals such as Samsung Electronics (005930.KS), opens new tab have introduced competing devices aimed at hosting artificial-intelligence 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 United States, the Department of Justice in March accused Apple of monopolizing the smartphone market and driving up prices.

For the fiscal second quarter, iPhone sales fell 10.5% to $45.96 billion, compared with analyst expectations of $46 billion. Apple executives said in February that the year-ago fiscal second quarter had benefited from a $5 billion surge in iPhone sales as the company caught up from supply-chain snarls during pandemic lockdowns.

Reuters Graphics

Excluding that one-time phenomenon, iPhone sales were down only slightly as the Cupertino, California, company's signature product faces stiff competition. In China, Huawei Technology (HWT.UL) has gained market share.

Cook said that 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 $16.37 billion for the fiscal second quarter that ended March 30, down 8.1% and above analyst expectations 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 (MSFT.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google are placing huge 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 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 this year, Cook said.

As it races to bring AI into its products, Apple's massive buyback program may appease investors who have been bruised by its sinking stock price.

"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," Investing.com analyst Thomas Monteiro said in a client note.

Apple's quarterly earnings per share were $1.53, above Wall Street estimates of $1.50, according to LSEG data.

Sales in Apple's services segment, which also represents Apple Music and TV offerings, rose to $23.87 billion, above analyst expectations of $23.27 billion, according to LSEG data.

Analysts had expected Mac sales to decline in the fiscal second quarter, but they instead grew to $7.5 billion, compared with estimates of $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," 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 $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 $7.91 billion, compared with analyst estimates of $8.08 billion, according to LSEG data.

Less than a week ahead of its much-anticipated iPad hardware event, Apple shared its Q2 2024 earnings today, and the numbers paint a predictable picture for the increasingly dated tablet line. iPad revenue fell substantially yet again (by 17 percent year over year) amid the longest-ever wait for new models — something Apple is days away from finally rectifying. At the same time, iPhone sales tapered off a bit (down 10 percent), while the company’s services business remains the star of the show. It was up 14 percent compared to the year-ago quarter.

Apple also released its Vision Pro headset during this quarter, but CEO Tim Cook didn’t offer any indication of how things are going. “During the quarter, we were thrilled to launch Apple Vision Pro and to show the world the potential that spatial computing unlocks,” he said in this afternoon’s press release.

This is the last earnings report before Apple’s WWDC conference in June; that’s where the company will reveal its approach to bringing generative AI software features to iOS, macOS, iPadOS, and its other platforms. “We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era,” Cook said on the earnings call with analysts.

Apple is said to be exploring potential partnerships with Google and OpenAI. The initial wave of AI features is expected to run on-device, Bloomberg’s Mark Gurman has reported, which could help them work faster while adhering to Apple’s privacy standards.

But before all that, Apple is expected to announce new iPad Pros (with OLED displays for the first time) and revamped iPad Airs this coming Tuesday — with a bevy of new accessories to go with the long-awaited devices. The Verge will be covering the virtual event live as it happens, so you’ll want to join us next Tuesday morning to get the full scoop.