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Apple shares rose on Thursday after it exceeded analysts’ downbeat expectations for quarterly revenue and executives projected a positive outlook for the year despite a bumpy start to 2024.
The tech company reported revenue of $90.75bn in the first three months of 2024, down 4 per cent from the year before but slightly ahead of consensus estimates for $90.3bn. Sales of its flagship iPhone were down 10 per cent from the year before to $46bn, compared with $51.3bn the previous year, and sales in China — a region on which investors have been particularly focused — fell to $16.3bn for the quarter, against $17.8bn a year ago.
But investors had feared this quarter could have been worse, and Apple’s shares rose 6 per cent after the earnings release. It also announced another $110bn in share buybacks and raised its quarterly dividend by 4 per cent.
Despite some worries about its core business, Apple forecast big product launches that could offset a turbulent start to 2024. It is projecting low single-digit growth for its hardware business, with continued strong growth in services. During the past quarter services revenue — which includes the App Store, Apple TV and Apple Pay — once again saw strong growth, up 14 per cent to a record $23.9bn.
On an earnings call following the results, chief executive Tim Cook was bullish about the prospects of new generative artificial intelligence features boosting hardware sales and promised more detail “in the weeks ahead”.
Analysts are hopeful that Apple can boost sales of its smartphones and laptops by unveiling long-anticipated new features, potentially at its developers’ conference in June. It also launched the Vision Pro headset in February and is expected to unveil a new iPad model at an event in May.
“I think the biggest take is that the business is holding together and setting up for what should be accelerating growth over the next three quarters,” said Gene Munster at Deepwater Asset Management. “That’s the reason the stock is up.”
Munster said the share buyback had surpassed his estimate of $90bn and projected Apple’s “confidence” about the rest of the year.
Apple stock had fallen 7 per cent year to date as of Thursday’s close. It has once again lost its position as the world’s most valuable listed company to Microsoft.
Since January, Apple has seen the cancellation of its years-long car project, mounting pressure from US and EU antitrust enforcers and slipping iPhone sales in China.
A report from Counterpoint Research last month said iPhone sales in the country fell 19 per cent year on year in the first three months of the year, while market researcher International Data Corporation reported the company lost its lead in the global smartphone market to Samsung as Chinese rivals such as Xiaomi and Huawei made gains as the wider market rebounded.
Apple chief financial officer Luca Maestri told the Financial Times that iPhone sales were still strong in China, despite it being “the most competitive smartphone market in the world”, with the number of active Apple devices at an “all-time high”.
Cook meanwhile emphasised that, even with sales in Greater China down year on year, they had still accelerated compared to the prior quarter, driven by the iPhone.
The $110bn share buyback showed that “we feel very good about the status of the company, [and] we have great confidence in what we have in store for our customers”, Maestri said, adding that “a very busy period” was coming in terms of new products.
Apple’s larger-than-expected share buyback and dividend increase continues a theme of big tech companies offering larger rewards for investors. Last week Google parent Alphabet announced its first dividend, sending its shares surging, following Meta, which did so in February.
Apple has also come under intense pressure from regulators on both sides of the Atlantic. The US Department of Justice brought an antitrust lawsuit against the tech giant in March. That same month, the EU opened an investigation over Apple’s potential failure to comply with the Digital Markets Act. It also fined Apple €1.8bn over the rules it applies to rival music streaming services on its App Store.
Diluted earnings per share in the quarter were $1.53, compared with consensus estimates of $1.50, up from $1.52 last year. Gross income was $23.6bn, above consensus estimates of $23.2bn.
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