Apple iPhone sales are increasing, strengthening the results amid a shaky economy
May 4 (Reuters) – Apple Inc’s ( AAPL.O ) results beat expectations on Thursday, showing the tech giant’s resilience in a slowing global economy thanks to better-than-expected iPhone sales and notable inroads in India and other emerging markets.
Shares of the largest US company by market capitalization rose 2% after Apple beat Wall Street̵[ads1]7;s expectations for revenue and profit for the April 1 quarter. The company’s results contrasted with disappointing figures from major chipmakers due to a slower-than-expected recovery in China’s economic growth.
Apple executives said Thursday that gross profit margins for the current quarter would be better than expected despite an expected decline in revenue as supply chain problems have improved.
Apple said sales for its fiscal second quarter ended April 1 fell 2.5% to $94.8 billion, ahead of expectations for a 4.4% decline, according to Refinitiv data. Earnings were flat at $1.52 per share, compared with estimates of $1.43 per share.
iPhone sales rose 1.5% to $51.3 billion, beating expectations for a 3.3% drop, even as consumers and businesses tightened spending amid rising inflation. Global smartphone shipments fell 13% in the first three months of 2023, according to research firm Canalys, which said Apple was gaining market share against Android rivals.
CFO Luca Maestri said Apple’s gross margin would be between 44% and 44.5%, above estimates of 43.7%, according to Refinitiv data. But he also said Apple’s revenue is likely to decline slightly. Analysts had expected a 2.1% increase to $84.7 billion for the company’s third quarter in June.
Apple’s stock has outperformed most of Wall Street in 2023, up 28% year to date. Investors see the company as a defensive play at a time of economic uncertainty.
Apple raised its dividend to 24 cents per share, up from 23 cents per share a year ago. The board approved a share buyback program of $90 billion, the same as a year ago.
EMERGING MARKETS EXCEL
Apple CEO Tim Cook told Reuters in an interview on Thursday that the company set a second-quarter financial record for iPhone sales, thanks in part to picking up new users in markets such as India, where Cook recently traveled for the opening of the country’s first Apple stores .
“We were thrilled with our performance in emerging markets,” Cook said. “We set records for iPhone installed base in all geographic segments, and we had very strong ‘new to’ (sales in) emerging markets, particularly in Brazil, India and Mexico.”
Cook also said supply chain snarl has disappeared. “We had no material shortages at all during the quarter on any of the products.”
Not all of Apple’s business lines were immune to the electronics slump. Mac sales fell sharply while iPad revenue fell. Sales in China also fell by 2.9%, a slightly larger decline than total revenue.
“Apple still needs China in the near term to drive sales and profits,” said Tom Forte at DA Davidson. “Long-term, emerging markets are important, especially India from a supply chain and sales point of view.”
Other technology firms have predicted a recovery in the second half. Wall Street expects Apple to recover more quickly and show modest year-over-year revenue growth in its third quarter that ends in June.
Investors are still waiting for the company’s next big hardware product. Bloomberg has reported that the iPhone maker could unveil a mixed reality headset as soon as next month, when it holds its annual software developer conference. The company recently announced new service businesses such as a high-yield savings account.
Mac sales fell more than 30%, compared with analysts’ estimates of a 25% decline, according to Refinitiv. Apple’s sales fared only slightly better than PC unit shipments in the market, which fell 33% in the calendar first quarter, according to Canalys.
Sales in Apple’s wearables business, which includes devices such as AirPods and the Apple Watch, fell less than 1%, compared with estimates for a 4.4% decline.
Apple’s biggest growth segment was its services business, which includes products like iCloud and Apple Pay, which grew 5.5% to $20.9 billion. Cook said Apple now has 975 million subscribers to its platform, which includes both Apple services and third-party apps, up from 935 million in the previous quarter and an increase of 150 million from a year ago.
Reporting by Stephen Nellis in San Francisco and Yuvraj Malik in Bengaluru Editing by Peter Henderson and Matthew Lewis
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