Apple Stock Rises after Earnings Beat as iPhone Sales Surpass Estimates
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Apple (NYSE: AAPL) stock is trading higher in US premarket price action today after the company posted better-than-expected earnings for the fiscal second quarter of 2023 led by strong iPhone sales.
Apple reported revenues of $94.8 billion in the quarter that ended April 1. While the sales fell 3% YoY making it the second consecutive quarter of decline – they were ahead of the $92.96 billion that analysts expected.
Looking at the business segments, iPhone sales came in at $51.3 billion which is higher than the $50.5 billion in the corresponding quarter last year. The metric was significantly higher than the $48.84 billion that analysts were expecting.
Mac sales plummeted in the fiscal second quarter
Mac sales meanwhile tumbled from $10.4 billion to $7.2 billion in the quarter and trailed analysts’ estimate of $7.8 billion. The sales decline is not surprising though as the International Data Corporation estimated that Mac sales fell 30% YoY in the March quarter which was the highest among major PC companies.
iPad sales also fell to $6.7 billion in the quarter as compared to $7.6 billion in the corresponding quarter last year. Services revenues meanwhile rose to $20.9 billion – a YoY rise of 5.4%.
Commenting on the earnings, Apple CEO Tim Cook said, “We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high.”
Apple earnings beat estimates
Apple reported gross margins of 44.3% in the quarter which is ahead of the 44.1% that analysts expected. The company’s adjusted EPS of $1.52 also surpassed analysts’ estimate of $1.43.
As has been the case for three years now, Apple did not provide forward guidance. However, CFO Luca Maestri said, “We expect our June quarter year-over-year revenue performance to be similar to the March quarter assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter.”
The company provided similar guidance for the March quarter as well but eventually, its revenues came in higher than the guidance.
Apple announced a stock buyback
Apple announced a new $90 billion stock buyback program and raised the quarterly dividend by 4%. It returned $23 billion to stockholders in the fiscal second quarter. While many have criticized massive corporate buybacks, Berkshire Hathaway chairman Warren Buffett defended them during his this year’s annual letter.
Berkshire is the second largest Apple stockholder and Buffett added more shares last year.
Barring Apple, all the FAANG peers have announced mass layoffs. During the earnings call, Cook said, “I view that (layoffs) as a last resort and, so, mass layoffs is not something that we’re talking about at this moment.”
Apple opened its first stores in India
Last month, Apple opened its first retail store in India. During the earnings call, Cook said that India is an “incredibly exciting market” and a “major focus” for the company.
Cook added, “There are a lot of people coming into the middle class, and I really feel that India is at a tipping point, and it’s great to be there.”
According to Cook, “The switcher and first-time buyer metrics look very good there for India.”
In response to an analyst question on how the Indian market compares with China a decade back, Cook said, “I think each country is different and has their own journey, and so I hesitate to compare too much. But what I do see in India is a lot of people entering the middle class, and I’m hopeful that we can convince some number of them to buy an iPhone. And we’ll see how that works out. But right now, it’s working out well.”
Apple has been gradually diversifying its supply chain from China. After meeting Indian Prime Minister Narendra Modi, Cook tweeted, that Apple is “committed to growing and investing across the country.” The Indian government said earlier this year that Apple would produce a quarter of iPhones in the country.
Apple supply chain
Apple hasn’t provided any official comments on how many iPhones it intends to make in the country over the long term, but analysts believe that 25% looks too farfetched.
Responding to a question on shifting supplies from China, Cook said, “We’re investing in the U.S. We’re investing in a number of other countries as well. And so, we make products everywhere. We’ll continue to invest everywhere. And we’ll continue to look for ways to optimize the supply chain based on what we learn each and every day and week and so forth to ensure that we can deliver the best products and services for our customers.”
FAANG earnings
All said FAANG earnings season is closing on a happy note with Apple. Barring the iPhone maker, only Meta Platforms impressed markets with its earnings while Alphabet, Amazon, and Netflix fell after releasing their earnings for the March quarter.
