Apple’s earnings fell less than feared despite the start of the year

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Apple shares rose on Thursday after quarterly earnings beat analysts’ low expectations and executives predicted a positive outlook for the year despite a bumpy start to 2024.

The technology company reported revenue of $90.75bn in the first three months of 2024, down 4 per cent from a year earlier. Sales of its flagship iPhone fell 10 per cent to $46bn, compared with $51.3bn a year earlier, and sales in China – a region investors have particularly focused on – fell to $16.3bn in the quarter. $17.8bn a year ago.

But investors feared the quarter could have been worse, and Apple’s shares rose 6 percent after the earnings release. It announced another $110bn share buyback and raised its quarterly dividend by 4 per cent.

Despite some concerns about its core business, Apple predicts big product launches to offset a turbulent start to 2024. It forecasts low single-digit growth for its hardware business, with continued strong growth in services. Revenue from services including the App Store, Apple TV and Apple Pay rose 14 percent to $23.9 billion last quarter.

In an earnings call following the results, Chief Executive Tim Cook was bullish on the prospects of new artificial intelligence features boosting hardware sales and promised more details “in the coming weeks.”

Analysts believe Apple can boost sales of its smartphones and laptops by unveiling long-awaited new features, likely at its developers conference in June. It 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 thing is keeping the business together and setting it up to accelerate growth over the next three quarters,” said Gene Munster at Deepwater Asset Management. “That’s why the stock is up.”

Munster said the share buyback exceeded his estimate of $90bn and predicted Apple’s “confidence” later in the year.

Apple shares fell 7 percent through Thursday’s close. It has once again lost its position as the world’s most valuable listed company to Microsoft.

Since January, Apple has scrapped its multi-year car program, facing increased pressure from US and EU antitrust enforcers and slipping iPhone sales in China.

A report by Counterpoint Research last month said iPhone sales in the country fell 19 percent year-on-year in the first three months of the year, while market researcher International Data Corp. said Samsung had lost its lead in the global smartphone market to Chinese-language. Competitors such as Xiaomi and Huawei benefited from the broader market recovery.

Apple’s chief financial officer Luca Maestri told the Financial Times that iPhone sales are still strong in China and the number of active Apple devices is at an “all-time high” despite “the most competitive smartphone market in the world”.

Cook, meanwhile, insisted that while sales in Greater China were down year-over-year, they were still accelerating compared to the previous quarter, driven by the iPhone.

$110bn stock buyback “We feel very good about the position of the company, [and] “We are very confident in what we have in store for our customers,” said Maestri, adding that “it will be a very busy time” in terms of new products.

Apple’s larger-than-expected share buyback and dividend increase continue to be a theme of big tech companies offering big rewards to investors. Last week, Google parent Alphabet announced its first dividend, following Meta, which did so in February.

Apple has 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. In the same month, the European Union opened an investigation into Apple’s possible failure to comply with the Digital Markets Act. It fined Apple 1.8 billion euros over rules it applied to competing music streaming services in its App Store.

Diluted earnings per share for the quarter were $1.53, compared to consensus estimates of $1.50, compared to $1.52 last year. Total revenue was $23.6bn, compared to consensus estimates of $23.2bn.

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