Apple shares rise after iPhone returns, tops sales estimates

(Bloomberg) — Apple Inc. shares rose in premarket trading after reporting a pick-up in iPhone sales last quarter, helping the world’s most valuable company top earnings estimates and weather an industry-wide slump that has hit much of its product lineup.

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Total revenue totaled $94.8 billion in the fiscal second quarter, Apple said Thursday, beating the $92.6 billion analysts had forecast. Although sales fell 2.5% in the period, the company had warned investors to expect a drop of roughly double that.

The results suggest that Apple is beginning to recover from a slump that has plagued both the computer and smartphone industries. That’s a particular relief for investors after Qualcomm Inc., a key supplier, raised fresh concerns about phone demand earlier this week. Apple̵[ads1]7;s sales in China – a weak spot for other tech companies – also came in slightly better than expected.

As expected, Apple announced plans for $90 billion in share buybacks – the same as last year’s plan. The company also raised its quarterly dividend by 4% to 24 cents per share.

The stock rose 2.2% in pre-market trading on Friday. They had closed at $165.79 in New York on Thursday, up 28% for the year.

While the performance was better than expected, it marked two straight quarters of sales declines — a first for Apple since the pandemic began. Earnings, meanwhile, were unchanged from the previous year, at $1.52 per share. That compared with an average estimate of $1.43 per share.

In a conference call with analysts, Apple said revenue in the current period would fall by a similar amount to the previous quarter, which ended April 1. That suggests a decline of around 3%. The company also said it will continue to see a negative impact from exchange rates.

Apple generated $51.3 billion in sales from the iPhone — its flagship product — in the second quarter, topping analysts’ forecasts of $49 billion. That’s up just 1.5% from a year ago, but marked a record performance for a March quarter, CEO Tim Cook said. The increase came “despite the challenging macroeconomic environment,” he said in the statement.

Like many tech CEOs who deliver earnings reports, Cook also discussed artificial intelligence. He said it had huge potential and that Apple would continue to weave it into products in a “very thoughtful” way.

Read more: Apple’s Tim Cook says AI concerns still need to be addressed

From a supply perspective, the second quarter was an opportunity for the iPhone 14 to recover. The unit had suffered from restrictions in the previous period due to Covid policies in China.

iPad saw revenue fall 13% to $6.67 billion, roughly in line with estimates of $6.7 billion. New models, which included a revamped entry-level version and Pro models with M2 chips, did little to spur purchases in the quarter.

Similarly, revenue in the Mac division fell 31% to $7.17 billion. That was after forecasts of $7.7 billion. Research firms have already warned that it was a dismal quarter for the lineup, with IDC estimating that Mac shipments fell around 40% in the quarter. Apple had updated the MacBook Pro and Mac mini, adding faster processors, but they failed to revive the device’s sales.

The home, wearables and accessories division – which includes AirPods, Apple Watch and the TV set-top box – fell less than 1% to $8.76 billion. That beats estimates of $8.5 billion. The company added a faster processor to Apple TV during the holiday quarter and updated the HomePod speaker during the March quarter.

The services business, which includes iCloud, Apple Music, the App Store and the TV+ streaming service, brought in $20.91 billion, missing estimates of $21.1 billion. Nevertheless, there was a gain of 5.5% from the previous year. Last quarter, Apple promised that services revenue – along with the iPhone – would accelerate.

The company did particularly well in emerging markets, Cook said, pointing to record quarterly sales in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the United Arab Emirates. And the company’s overall sales would have increased if you held the currencies constant, he said.

For Apple and other US companies with a global footprint, a strong dollar has reduced the value of revenue generated in other parts of the world.

“Despite these challenges, we continue to thrive over the long term,” Cook said.

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