Apple Inc. (NASDAQ:AAPL) experienced a significant surge in its stock price, climbing as much as 6% following the announcement of earnings that surpassed forecasts and the revelation of a new $110 billion share repurchase program.
The tech giant disclosed its second-quarter earnings late Thursday, reporting earnings per share (EPS) of $1.53 on revenue of $90.8 billion. Analysts had projected EPS of $1.50 on revenue of $90.3 billion, according to data compiled by Bloomberg.
Despite a decline of 8% in Greater China revenue to $16.37 billion, which encompasses mainland China, Taiwan, Singapore, and Hong Kong, the figure exceeded analysts’ expectations of $15.87 billion. Luca Maestri, Apple’s CFO, noted growth in mainland China during the quarter.
iPhone revenue, a critical metric for Apple, totaled $45.96 billion, down from $51.33 billion in the same period last year. Additionally, the company announced an additional $110 billion allocation for share repurchases and increased its dividend to $0.25 per share. Shareholder returns strategies have become prominent among Big Tech companies, with Meta introducing a dividend in February and Alphabet unveiling plans to initiate dividend payments last month.
Before the earnings report, Apple stock had experienced a 10% decline year-to-date, underperforming many of its Big Tech counterparts and the broader market.
In the fiscal second quarter, Mac revenue reached $7.45 billion, surpassing the anticipated $6.79 billion, while iPad revenue stood at $5.55 billion, outperforming analysts’ expectations of $5.91 billion. Wearables, including AirPods, the Apple Watch, and Vision Pro, generated $7.91 billion in revenue, slightly below Wall Street’s projection of $8.28 billion.
Services revenue reached an all-time high of $23.87 billion, up from $20.91 billion the previous year, marking another positive outcome for Apple. Analysts had forecasted services revenue of $23.28 billion.
During the earnings call, Apple projected low single-digit revenue growth for the current quarter, with double-digit growth expected in services revenue, maintaining a pace similar to the first half of the fiscal year.
JPMorgan analysts, led by Samik Chatterjee, stated in a client note that these results position the company strongly for Fiscal Year 2024, particularly with the impending AI smartphone upgrade cycle. Following the announcement, JPMorgan reaffirmed its Overweight rating on the stock and raised its price target to $225 per share from $210.
Apple is preparing for its Worldwide Developers Conference (WWDC) in June, where it is expected to unveil the latest iterations of its operating systems, including iOS, macOS, watchOS, iPadOS, and visionOS. Among the anticipated announcements is the integration of generative AI across Apple’s product lineup.
CEO Tim Cook expressed confidence in Apple’s advantages in this new era during the earnings call. Evercore ISI analysts, led by Amit Daryanani, believe that positive catalysts, including details on Apple’s AI strategy at WWDC, will drive the stock higher. Evercore maintained its Outperform rating and $220 price target on the stock.
While Apple may have arrived later at the generative AI landscape compared to its Big Tech counterparts, the company has been actively acquiring AI firms and developing its large language model to bolster its AI initiatives. Maestri confirmed significant investments in generative AI technologies, with plans to collaborate with entities such as OpenAI and Google to enhance its AI offerings.
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