Thursday, June 20, 2024

Apple shares rise as sales fall less than feared despite China decline

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Apple shares rose on Thursday after it surpassed analysts’ downbeat expectations for revenue in the first three months of 2024 as it navigates lower sales in China compared with the prior year.

The tech company on Thursday reported revenue of $90.75bn in the past quarter, down 4 per cent from the year before but slightly ahead of consensus estimates for $90.3bn. Apple also announced another $110bn in share buybacks and raised its quarterly dividend by 4 per cent.

Services revenue — which includes the App Store, Apple TV and Apple Pay — once again saw strong growth, up 14 per cent to a record $23.9bn. By contrast, revenue from its best-known product, the iPhone, was $46bn, compared with $51.3bn the previous year. Diluted earnings per share were $1.53, compared with consensus estimates of $1.50, down from $1.52 last year.

Shares bounced more than 7 per cent higher in after-hours trading. This year, Apple’s stock has fallen about 7 per cent and it has once again lost its position as the world’s most valuable listed company to Microsoft.

“I think the biggest take is that the business is holding together and setting up for what should be accelerating growth over the next three quarters,” said Gene Munster at Deepwater Asset Management. “That’s the reason the stock is up.”

Munster said the share buyback had surpassed his estimate of $90bn and projected Apple’s “confidence” about the rest of the year.

Apple has had a rocky start to the year, with the cancellation of its years-long car project, mounting pressure from US and EU antitrust enforcers and slipping iPhone sales in China.

Net sales in the greater China region were $16.3bn for the quarter, compared with $17.8bn a year ago.

There have been warning signs about its China business. A report from Counterpoint Research last month said iPhone sales in the country fell 19 per cent year on year in the first three months of the year, while market researcher International Data Corporation reported the company lost its lead in the global smartphone market to Samsung as Chinese rivals such as Xiaomi and Huawei made gains as the wider market rebounded.

Apple chief financial officer Luca Maestri told the Financial Times that iPhone sales were still strong in China, despite it being “the most competitive smartphone market in the world”, with the number of active Apple devices at an “all-time high”.

The $110bn share buyback showed that “we feel very good about the status of the company, [and] we have great confidence in what we have in store for our customers”, Maestri said, adding that “a very busy period” was coming in terms of new products. It launched the Vision Pro headset in February and is expected to unveil a new iPad model at an event in May.

Apple has also come under intense pressure from regulators on both sides of the Atlantic. The US Department of Justice brought an antitrust lawsuit against the tech giant in March. That same month, the EU opened an investigation over Apple’s potential failure to comply with the Digital Markets Act. It also fined Apple €1.8bn over the rules it applies to rival music streaming services on its App Store.

Analysts are hopeful that Apple can boost sales of its smartphones and laptops by announcing long-anticipated generative artificial intelligence features, potentially at its developers’ conference in June. Chief executive Tim Cook has promised to share details of the company’s work in the AI space later this year.

“We’re very bullish about our opportunity in generative AI,” Maestri said.

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