Apple sales fall less than expected, CEO sees return to growth

By Stephen Nellis, Max A. Cherney and Yuvraj Malik

(Reuters) -Apple on Thursday reported a smaller-than-expected decline in quarterly revenue, and Chief Executive Tim Cook told Reuters the company expects a return to sales growth in the current quarter as it invests on AI capabilities to be revealed in the coming months.

Apple increased its cash dividend by 4% and authorized an additional program to buy back $110 billion of its shares. The repurchase is the largest in the company’s history, according to Thomas Monteiro, an analyst at Investing.com.

Apple shares rose about 7% in extended trading following the report.

Apple’s results suggest that the company may be regaining its position in the smartphone market, despite strong competition and regulatory challenges.

Long considered a must-buy stock on Wall Street, Apple shares have underperformed other big tech companies in recent months, falling 10% this year as it faces weak iPhone demand and stiff competition in China.

Apple said fiscal second-quarter revenue fell 4% to $90.8 billion, beating analysts’ average estimate of $90.01 billion, according to LSEG data.

For Apple’s current quarter, which ends in June, Cook told Reuters that the iPhone maker expects “single digit growth” in overall revenue. Wall Street expects revenue growth of 1.33% to $82.89 billion, according to LSEG data.

Apple faces a number of challenges in its business. Smartphone rivals such as Samsung Electronics have launched competing devices aimed at hosting artificial intelligence chatbots.

On the regulatory front, Apple’s services business, which contains its profitable App Store and was one of the few areas of growth in the fiscal second quarter, is under pressure from a new law in Europe. In the United States, the Department of Justice in March accused Apple of monopolizing the smartphone market and raising prices.

In the fiscal second quarter, iPhone sales fell 10.5% to $45.96 billion, compared to analyst expectations of $46 billion. Apple executives said in February that the previous year’s fiscal second quarter benefited from a $5 billion increase in iPhone sales as the company recovered from supply chain problems during pandemic lockdowns.

Excluding this unique phenomenon, iPhone sales are down only slightly as the Cupertino, California company’s exclusive product faces stiff competition. In China, Huawei Technology gained market share.

Cook said iPhone sales still experienced “growth in some markets, including China.”

But Apple’s revenue decline in China was not as sharp as analysts expected, with sales in Greater China of $16.37 billion in the fiscal second quarter ended March 30, down 8.1% and above. analysts’ expectations of $15.59 billion, according to data from Visible Alpha.

The story continues

Apple has said little about its product plans for artificial intelligence, the technology on which rivals Microsoft and Alphabet Inc’s Google are making big bets. The company began increasing spending on research and development last year, and Cook said the company has spent more than $100 billion on R&D over the past five years.

“We remain very optimistic about our opportunity in generative AI and are making significant investments,” he said. “We’re looking forward to sharing some really exciting things with our customers” at events later this year, Cook said.

Apple’s quarterly earnings per share were $1.53, above Wall Street estimates of $1.50, according to LSEG data.

Sales in Apple’s services segment, which also represents Apple’s music and TV offerings, rose to $23.87 billion, above analyst expectations of $23.27 billion, according to LSEG data.

Analysts expected Mac sales to fall in the fiscal second quarter, but instead they grew to $7.5 billion, compared with estimates of $6.86 billion, according to LSEG data.

“They were really motivated by the strength of the new MacBook Air powered by the M3 chip,” Cook said. “About half of our MacBook Air buyers during the quarter were new to the Mac.”

The company’s sales in the iPad segment fell to $5.56 billion, below analysts’ expectations of $5.91 billion.

In the company’s wearables segment, which represents sales of Apple Watches and AirPods headphones, sales fell to $7.91 billion, compared with analyst estimates of $8.08 billion, according to LSEG data.

(Reporting by Stephen Nellis and Max Cherney in San Francisco and Yuvraj Malik in BengaluruAdditional reporting by Noel Randewich in Oakland, CaliforniaEditing by Matthew Lewis)