Apple earnings results: Tim Cook announces biggest-ever stock buyback of $110 billion as sales and EPS beat expectations
Apple reported its fiscal second-quarter earnings on Thursday.
The company beat on sales and earnings per share, and did better than expected in China.
Apple announced a $110 billion stock buyback — its biggest ever. Shares climbed 6% after hours.
Apple reported fiscal second-quarter earnings on Thursday after the closing bell. Wall Street was pleased, with shares popping 6% in after-hours trading.
The company reported revenue and earnings per share that beat consensus expectations. It also saw better-than-expected sales in Greater China, which has been a source of concern for investors wary of a slowdown.
However, overall iPhone sales were down 10% year over year.
The tech titan also said it will increase its quarterly dividend to 25 cents a share, up from 24 cents, and repurchase an additional $110 billion of stock — its largest ever share buyback.
Apple's stock climbed 2.2% on Thursday ahead of the earnings results, but was still down 10% year-to-date at the close.
Tim Cook closes out the call talking up Vision Pro's enterprise potential
Cook says enterprise customers are using the Vision Pro "for many different things." Apple is focusing on growing the Vision Pro "ecosystem and getting more apps." He points to field service work and healthcare-related uses, like a doctor prepping for surgery, as examples of where enterprise customers are experimenting with the $3500 headset.
"We're we're off to a good start," Cook says to close out the call.
Apple sounds happy about its growth in emerging markets outside of China
CFO Luca Maestri has a positive message for analysts watching growth in other emerging markets outside of China.
"Obviously China is by far the largest emerging market we have," the CFO says. But, he names India, Turkey, Brazil, Mexico, Indonesia, and Saudi Arabia as markets that are, in aggregate, beginning to shorten the gap with China's revenue.
"The numbers are getting large, and we're very happy," Maestri says.
Cook says there's "clearly work" to do in China, but he remains "very optimistic"
Sales in Greater China were down, but less than what Wall Street had expected. Cook says while the company's third-largest market is highly competitive, he remains "very optimistic" and says he's seen enthusiasm from customers there, such as during the opening of a new Shanghai Apple store in March.
But with rivals like Huawei and Samsung reportedly eating into Apple's smartphone market share in the region, competition is fierce.
"I think it has been, and is, the most competitive market in the world," Cook says.
He maintains that Apple has "a lot of happy customers" in China.
Analysts keep trying to get Cook to reveal more about the upcoming AI announcements
The analysts keep trying to get Apple's CEO to talk about any generative AI announcements, but Cook is keeping a tight lid on things.
But he teases big announcements in the "coming weeks."
He believes there are "big opportunities across our products" for generative AI, and promises that Apple is "well positioned" to take on the space.
But, he's not saying much more than that.
Tim Cook says it's "really too early" for takeaways after introducing third-party app stores in the EU
Apple fought the introduction of third-party app stores on the iPhone, which are currently only available in the EU as the result of a regulator ruling. Apple has said outside app stores introduce security and privacy concerns for customers.
"We're focused on complying while mitigating the impacts to user privacy and security," Cook says.
Apple's CFO expects "low single-digit growth" for the current quarter
CFO Luca Maestri says the company is pleased with how its services business is going and has high expectations for how the iPad will grow in revenue, with iPad growth in the double digits expected.
"On the outlook we expect to grow in low single digits in total for the company, services to grow in double digits," Maestri says.
Cook says iPhone 15 is a “bestseller” in urban China
"Everywhere I travel, people have such a great affinity for Apple," Cook says.
Cook said the iPhone 15 and iPhone 15 Pro Max are the leading smartphones in urban China despite the threat of competitors in the market.
And we're off: Tim Cook kicks off the earnings call
Apple's CEO highlights the company's EPS record of $1.53 and revenue records in a dozen countries and regions.
He also shouts out Apple's services business for setting an all-time revenue record, which was up 14% year over year.
Cook tells CNBC he’s feeling positive about China
Apple beat out analysts' expectations in the Chinese market, even if overall sales there were still down.
"I feel good about China, I think more about long term than to the next week or so," Cook told CNBC.
Cook said that it "may come as a surprise to some people," but iPhone sales grew in China during the quarter.
Tim Cook teases “big plans to announce” from an “AI point of view” in coming weeks
Apple is expected to show off new OLED iPads next week at a May 7th event and iOS 18 at its Worldwide Developers Conference in June, where generative AI is anticipated to be a big theme.
"I'm literally on the edge of my seat," Cook told CNBC in an interview.
Analyst reaction: Emarketer looks to Apple's expected AI announcements at WWDC in June
"It's been a tough year for Apple, no longer the world's most valuable company nor the top smartphone provider," Emarketer analyst Jacob Bourne told Business Insider. "Waning iPhone demand in China has notably dented revenues. Meanwhile, the much-hyped Vision Pro has fallen short of market expectations."
"However, upcoming WWDC announcements could dispel concerns over Apple's AI strategy just as the tech giant demonstrates its strength in segments beyond the iPhone," Bourne added. "By exploring deals with software giants for on-device AI, Apple isn't showing weakness but strategic savvy—reinforcing its hardware dominance while exercising reasonable caution."
Apple stock rallied 4% in after-hours trading.
Apple beats sales and EPS estimates, does better than expected in China.
2nd quarter
Revenue: $90.75 billion, -4.3% y/y, estimate $90.33 billion (Bloomberg Consensus)
Products revenue: $66.89 billion, -9.5% y/y, estimate $66.95 billion
iPhone revenue: $45.96 billion, -10% y/y, estimate $45.76 billion
Mac revenue: $7.45 billion, +3.9% y/y, estimate $6.79 billion
iPad revenue: $5.56 billion, -17% y/y, estimate $5.91 billion
Wearables, home and accessories: $7.91 billion, -9.6% y/y, estimate $8.29 billion
Service revenue": $23.87 billion, +14% y/y, estimate $23.28 billion
Greater China revenue: $16.37 billion, -8.1% y/y, estimate $15.87 billion
EPS: $1.53 vs. $1.52 y/y, estimate $1.50
Total operating expenses: $14.37 billion, estimate $14.33 billion
Gross margin: $42.27 billion, +0.7% y/y, estimate $42.01 billion
Cash and cash equivalents: $32.70 billion, estimate $36.83 billion
Cost of sales: $48.48 billion, estimate $48.52 billion
Total current assets: $128.42 billion, estimate $142.22 billion
Total current liabilities: $123.82 billion, estimate $116.82 billion
Source: Bloomberg
Apple stock rises more than 2% into earnings
Apple stock is up 2.27% heading into the company's fiscal second-quarter earnings release.
The intra-day gain is more than double the S&P 500's 1% gain and far ahead of the Nasdaq 100's 1.6% gain on the day.
Investors appear hopeful heading into the result, perhaps betting that most of the bad news is already priced in.
Wedbush says Apple has 'brighter days ahead'
Wedbush analyst Dan Ives said Apple's upcoming earnings report will be "rough" as Wall Street braces for weak iPhone sales, but the company has "brighter days ahead".
A surge in competition in China and a less enticing iPhone 15 upgrade cycle has weighed on Apple for months, with its stock price down more than 10% year-to-date while the broader stock market has moved higher.
But its not all bad news for Apple, according to Ives.
"The good news is help is on the way as we believe a pent-up demand cycle with an AI driven iPhone 16 model on the horizon should enable Cook & Co. to return to growth again in China with tailwinds into FY25," Ives said in a recent note.
Ives said he expects Apple CEO Tim Cook will strike an optimistic tone on the company earnings call, and that the upcoming software developers conference in June could be a catalyst for the stock.
Wedbush rates Apple at "Outperform" with a $250 price target.
Wells Fargo admits Apple has a 'tough near-term setup'
Wells Fargo said Apple faces a "tough near-term setup" due to weak iPhone sales in China, which has led the company to lose market share to local competitions like Huawei and Xiaomi.
The bank said Apple will likely see a 2% decline in its iPhone business this year, as its iPhone 15 has not lived up to the hype of sparking a replacement cycle for its massive user base.
"We now see F2Q24 iPhone ship b/w 50-52M; slightly below our 52.9M est," Wells Fargo said in a recent note. The bank said it expects a 20% year-over-year decline in Apple's China iPhone business, as well as the average selling price of the iPhone hitting $870, which is about $20 below Wall Street's estimates of $890.
Overall, Wells Fargo expects Apple to report a slight beat on revenue and earnings per share in the quarter, but said more importantly the focus will be on Apple's guidance and capital allocation plans.
"We think a dividend increase of 10% and another $90B in new share repurchase authorization would be viewed positively," Wells Fargo said.
Wells Fargo rates Apple at "Overweight" with a $225 price target.
Goldman Sachs says the risk in Apple stock is well understood by investors after its poor YTD performance
Goldman Sachs expects Apple to deliver an in-line quarter when it comes to its second-quarter revenue and earnings per share, and said that the risks in Apple stock are well understood by investors.
The bank said that any weakness in Apple stock following its earnings report, perhaps sparked by underwhelming third-quarter revenue guidance, would be an attractive entry point for investors.
The bank said investor focus should shift from Apple's earnings to its second half-of-the-year catalysts, which include new product announcements like the iPhone 16 and new product launches across its iPad and Mac lineup.
"June quarter earnings could mark a turning point in sentiment, with the next catalysts being Apple's Worldwide Developers Conference on June 10-14, where it will discuss the latest operating systems and potentially discuss new generative AI features and the launch of iPhone 16 in September," Goldman Sachs said.
Goldman Sachs rates Apple at "Buy" with a $226 price target.
Barclays expects weak iPhone sales
Channel checks at Barclays suggest "slightly better" iPad and Mac revenues will help offset weak iPhone revenue, according to a recent note.
The firm said Wall Street estimates for Apple are too high, with analysts underestimating the ongoing weakness in China.
"Our latest checks also indicate iPhone 15 sell-through in China continues to show DD declines on a Y/Y basis over the last few weeks, after being down 20% in C1Q, with a higher mix of the base models, leading to negative mix shift and margin headwinds, with likely ASP declines on a Y/Y basis," Barclays said.
Barclays also said the AI-capable iPhone 16 won't deliver the growth that some investors expect.
"We don't expect iPhone 16 to have significant design changes, and any differentiated GenAI applications with the iPhones will likely not launch until 2025 at the earliest. The initial build plan for iPhone 16 is expected to be in low 80Ms range, implying flattish unit growth Y/Y," Barclays said.
Barclays rates Apple at "Underweight" with a $158 price target.
JPMorgan expects short-term headwinds in iPhone sales will give way to AI tailwinds
Low expectations heading into Apple's second-quarter earnings release are warranted, according to JPMorgan, but the "cyclical headwinds" could soon turn into "AI tailwinds," according to a recent note.
"The upcoming earnings print will still matter for investors in offering insights into the magnitude of the cyclical challenges on account of pressured consumer spending as well as the headwinds in relation to market share moderation in China," JPMorgan said.
The bank said investor expectations might be so low that a slight miss from Apple could spark a turnaround in the stock price as the results turn out better than feared.
JPMorgan said that based on the latest demand trends, it expects Apple to report a modest revenue miss in the quarter, as well as a "more significant" miss to revenues when it reports third-quarter revenue guidance.
JPMorgan rates Apple at "Overweight" with a $210 price target.
Apple's consensus second-quarter revenue estimate is $90.33 billion.
2nd quarter
Revenue estimate: $90.33 billion
Products revenue estimate: $66.95 billion
iPhone revenue estimate: $45.76 billion
Mac revenue estimate: $6.79 billion
iPad revenue estimate: $5.91 billion
Wearables, home and accessories estimate: $8.29 billion
Service revenue estimate: $23.28 billion
Greater China rev. estimate: $15.87 billion
EPS estimate: $1.50
Operating cash flow estimate: $22.87 billion
Total operating expenses estimate: $14.33 billion
Gross margin estimate: $42.01 billion
Cash and cash equivalents estimate: $36.83 billion
Cost of sales estimate: $48.52 billion
Total current assets estimate: $142.22 billion
Total current liabilities estimate: $116.82 billion
Source: Bloomberg
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