To The Moon

Apple Stock Jumps on Better-Than-Feared Earnings Report and Huge Buyback

$Apple(AAPL)$   shares gained ground in late trading Thursday after the company posted March quarter results that weren't as bad as the market had feared.

For the March quarter, Apple posted revenue of $90.8 billion, down 4% from a year ago, and slightly above the Wall Street consensus forecast as tracked by FactSet of $90.5 billion. This was the company's fifth down quarter of the last six. Apple said it expects to return to modest revenue growth in the June quarter.

Profits were $1.53 a share, just above the Street consensus of $1.51.

It's been a rough year so far for Apple investors, with the stock down about 10% in 2024. The slide raised the stakes for the company's fiscal second-quarter earnings report. But Apple bulls are breathing a little more easily this afternoon , with the the stock up 6.3% in after-hours trading following the report.

The key to Apple results is almost always the iPhone, which accounts for more than half of Apple's total revenue.

In the March quarter, iPhone sales tumbled 10.5%, to $46 billion, which compares with the Wall Street consensus forecast of $46.3 billion. As expected, results were pressured in part by weak demand in China, where the company is losing market share to Huawei and other local competitors.

On the company's conference call, Cook addressed the company's work on artificial intelligence software and services.

"We continue to feel very bullish about our opportunity in generative AI, Cook said. "We are making significant investments and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple silicon with our industry leading neural engines, and our unwavering focus on privacy, which underpins everything we create."

Apple posted iPad revenue of $5.6 billion, which was off 16.7%, and below the Wall Street estimate of $6.9 billion. Apple has scheduled a "special event" for May 7 that is expected to include the first upgrades to the iPad lineup since 2022.

Mac sales were a positive surprise, up 3.9% to $7.5 billion, ahead of consensus at $6.8 billion.

Wearables, home, and accessories revenue were $7.9 billion, down 9.6%, and in line with the Street consensus. That decline comes despite the recent launch of the Apple Vision Pro mixed reality headset.

Services was again the bright spot for Apple, with revenue up 14.2% to $23.9 billion, which compares with the Street consensus at $23.1 billion. Overall product revenues were down 9.5% to $66.9 billion.

Apple also increased its quarterly dividend to 25 cents from 24 cents, while expanding its stock repurchase program by $110 billion. This was the 12th year in a row that Apple has increased its dividend. Apple said it spent $23.5 billion buying back stock in the quarter. The company finished the quarter with $58 billion in net cash.

Cook said on the call that Apple's iPhone sales in China increased in the quarter from a year earlier, a disclosure that will likely surprise investors who have generally expected a rough quarter for iPhone sales in China. "Greater China" revenue was off 8.1% in the March quarter, to $16.4 billion, better than the $15.3 billion the Street had expected.

Revenues were off 1% in the Americas, up less than 1% in Europe, down 13% in Japan and 17% lower in the rest of Asia.

Apple faces some risks of retaliation by Beijing in response to the U.S. government's recently-passed measure, which orders ByteDance to sell TikTok's U.S. operations -- or else be banned.

Expect questions on the call as well about the recently filed Justice Department lawsuit, which asserts that Apple has taken multiple anticompetitive steps in an effort to preserve its strong market position in smartphones.

And you can expect Cook to provide at least anecdotal commentary on the early sales of the company's Vision Pro mixed reality headsets.

For the June quarter, $Apple(AAPL)$   expects revenue to be up in the low single digits, which is consistent with Wall Street's consensus forecast for revenue of $83.3 billion. Apple sees services revenue up double digits at a similar level to the first half, which implies growth of 12.7%. The company sees iPad revenue up double digits in the quarter, but provided no similar guidance on iPhones, Macs, or wearables. The company expects gross margin of between 45.5% and 46.5%, down from 46.6% in the March quarter. Apple CFO Luca Maestri said on the call that the company expects modest headwinds in the June quarter from both higher memory chip prices and from unfavorable foreign exchange rates.

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