Apple's second quarter performance was not surprising, but after hours the company offered its largest ever $110 billion stock buyback, causing Apple's stock price to rise by 7%.
On May 3rd, Apple released its second quarter earnings as of March 30th, 2024, with a revenue of $90.753 billion, down from $94.836 billion in the same period last year, a year-on-year decrease of 4.3%; The company's net profit was 23.636 billion US dollars, compared to 24.16 billion US dollars in the same period last year, a year-on-year decrease of 2.17%.
Apple did not provide formal guidance, but Apple CEO Tim Cook stated that overall sales will grow at a "low single digit" rate in the quarter of June.
IPhone revenue decreases by 10%
The main reason for Apple's decline in performance is the decline in iPhone revenue, which accounts for the largest portion of its revenue. In the second quarter, iPhone revenue was $45.96 billion, a year-on-year decrease of 10.5%, basically in line with the expectation of $46 billion. This indicates weak demand for this generation of smartphones released in September last year.
The second quarter of the Apple iPhone was a high-pressure financial season, with constant feedback that iPhone sales were declining. The sales of iPhones in China have also been challenged by competitors such as Huawei.
According to a report from third-party market research firm IDC, Apple shipped 50.1 million units in the first quarter, a 9.6% decrease from 55.4 million units in the same period last year. Apple has declined by 6.6% in the Chinese market.
However, Cook told the media that sales in the second quarter were facing difficulties compared to the same period last year, when the company delayed sales of the iPhone 14 due to supply issues, achieving sales of $5 billion.
"If we exclude this $5 billion from last year's performance, our performance for this quarter will achieve year-on-year growth. This is how we look at the problem from the company's internal performance," Cook said.
Mac's sales increased by 4% to $7.45 billion, but still below the highest level set by the product in 2022.
Cook said that Apple's new MacBook Air, equipped with an upgraded M3 chip, released in March this year, has boosted sales.
Apple reported a 10% year-on-year decrease in sales of other products (Apple Watch and AirPods earphones) to $7.9 billion.
In this quarter, Apple released its first new major product category in years, the Vision Pro virtual reality headset, but this $3500 device is expected to have low sales, especially compared to Apple's main product line.
Cook said, "We only touched the surface there, so we were extremely excited about the opportunity there."
During a earnings conference call with analysts, Apple CFO Luca Maestri stated that the company expects double-digit year-on-year growth in iPad sales for the current quarter. He also emphasized that the service sector is expected to continue to grow at the high rate of the past two quarters.
Apple is expected to release a new iPad on May 7th, which may boost demand for the product line.
Cook also stated that Apple will announce "major plans" at next week's iPad product launch and June's Global Developers Conference.
This fiscal quarter, Apple's service business was a highlight. Sales increased by 14.2% to $23.9 billion. This is how Apple reports its subscription services, warranties, authorized transactions with search engines, and payment revenue. The company has a broad definition of subscribers, including users who subscribe to apps through the Apple App Store. It has over 1 billion paying users.
Revenue in Greater China region decreased by 8%
Sales in Apple's third largest market, Greater China, decreased by 8% to $16.37 billion, significantly better than the $15.25 billion sales expected by FactSet analysts. This may ease investor concerns that Apple may be losing market share to local competitors such as Huawei.
Cook stated during a conference call that he has seen growth in some markets, including mainland China. According to Kantar's data, the two best-selling smartphones in urban areas of China this quarter are the iPhone 15 and iPhone 15 Pro Max.
Cook said that from the past to the previous quarter, China has been the most fiercely competitive market in the world. If viewed from a distance, many people are entering the middle class, and Apple strives to provide high-quality service to customers and has many satisfied customers.
In March of this year, Cook visited China and attended the opening of a new Apple store in Shanghai. "I had a wonderful time there. We opened a new store in Shanghai and received a very enthusiastic and energetic reception. I had a wonderful journey and enjoyed the time there. Therefore, I have a positive attitude towards China's long-term development. I don't know how things are every quarter and every week. But in the long run, I hold a very positive view," Cook said.
The opening of Apple's new store at Jing'an Temple in Shanghai was warmly welcomed by users, and Cook was often recognized by consumers during his time in China and asked to take a group photo as a souvenir.
However, the Chinese mobile phone market has always been the most fiercely competitive market in the world. The return of Huawei phones poses a certain challenge to Apple's iPhone sales.
Initiate $110 billion stock repurchase
Apple announced that its board of directors has authorized $110 billion in stock repurchases, a 22% increase from the $90 billion authorized last year. Simultaneously increase the dividend by 4% to 25 cents per share.
According to Birinyi Associates, this is the largest buyback in history, surpassing Apple's previous buybacks. In 2018, Apple authorized a $100 billion stock buyback. And in the top 10 largest stock buyback announcements in US history, Apple also ranks in the top 6.
According to media statistics, Apple spent over $572 billion on its stock buyback program from 2012 to 2022.
"This is an astonishing number," commented Steve Sosnick, Chief Strategist at Yingtou Securities
"Apple may acknowledge that they are becoming a value stock that returns funds to shareholders, rather than a high powered growth stock that requires cash for research and development or expansion."
Apple CFO Luca Maestri stated in his financial report that the company announced its largest ever stock buyback due to "very high" customer satisfaction and loyalty. "Given our confidence in Apple's future and the value we see in the stock, our board of directors has authorized an additional $110 billion for stock buybacks."
However, Apple's announcement of high dividend payouts also had an immediate effect, with its post market value increasing by $180 billion.