iPhone sales down 10% sounds right appleConsider that the company relies on these devices for half of its revenue.
But on Thursday, investors didn’t seem to mind when Apple reported a year-over-year decrease in second-quarter profit. The stock rose more than 6% after the close, and had normal trading continued on Friday, the stock’s gain would have been its biggest since November 2022.
Wall Street isn’t paying too much attention to iPhone revenue, choosing instead to focus on the positives. Apple’s gross profit margin expanded to 46.6% and continues to trend upward, reflecting the company’s growing services business, which has brought in substantial profits.
Apple also said that overall revenue growth this quarter will be in the low single digits, following a 4% decline in the second quarter. Analysts expect third-quarter growth of 1.3%, according to LSEG.
Deepwater Asset Management’s Gene Munster described the guidance as “a sigh of relief” given the recent trajectory of the business.
“I expect it to be flat, and some investors are saying it’s going to be down a few percentage points in June,” Munster told CNBC’s “Fast Money” after the report was released. “I think that’s a big part of this rally. part.”
But perhaps the biggest catalyst for the pandemic was Apple’s announcement that it had approved $110 billion in stock buybacks, the most ever for a public company. Apple has approved $90 billion in buybacks each of the past three years.
The rise in the stock price after the bell showed how much investors value Apple’s huge cash flow and the company’s willingness to return more cash flow to shareholders. It’s a shift in Wall Street’s view of Apple over the years, from a hot products business to a financial behemoth.
“Our free cash flow has been very strong over the years, especially the past few years,” Apple Chief Financial Officer Luca Maestri said on the earnings call.
Apple revealed earlier this year that it has 2.2 billion active devices, showing the breadth of its customer base as the company launches new subscription services. Despite a 4% revenue decline, Apple still recorded profits of nearly $24 billion, down just over 2% from a year earlier.
Apple said iPhone sales were struggling compared with last year, when sales rose after previous shortages. Still, investors are anticipating future iPhone growth, and many analysts say a potential iPhone with artificial intelligence capabilities could achieve that goal and help the company win customers away from Android. Annual iPhone revenue peaks in Apple’s fiscal 2022.
Although Apple provided some total revenue guidance, it avoided providing any kind of forecast for iPhone sales.
That’s a change even for a company that has provided less forward guidance since the pandemic. Maestri typically provides iPhone sales trends, and has done so for the past four quarters.
There’s no guarantee that investors can continue to count on increased buybacks from a company that’s been more active in the sector than any other. Apple said it was trying to tap into its massive cash hoard, which stood at $162 billion at the end of the quarter. Executives said Thursday that Apple will evaluate what to do next when its debt roughly equals its cash balance, meaning the company is net cash neutral.
According to statistics, as of the end of 2023, Apple has spent $658 billion on repurchases in the past 10 years, far ahead of the second-place Microsoft. S&P Dow Jones Indices.
“We were at $90 billion in revenue over the last few years and now we’re at $110 billion in revenue,” Maestri said on the call.
As for what happens when Apple becomes net cash neutral, Maestri said, “Let’s get there first. It’s going to take a while.”
“Then when we get there,” he said, “we’ll re-evaluate and see what the optimal capital structure is for the company at that time.”
watch: Apple is working with artificial intelligence
About The Author
