Apple unveils record $110bn buyback as results beat low expectations

Apple‘s quarterly results and forecast beat modest expectations on Thursday, as the iPhone maker unveiled a record share buyback program, sending its stock up 6 per cent in extended trade.

Apple increased its cash dividend by 4 per cent and authorised an additional programme to buy back $110bn of stock. The buyback is the largest in the company’s history.

Apple‘s quarterly revenue fell, but less than analysts had expected, and CEO Tim Cook said revenue growth would return in the current quarter.

The results and guidance suggest the company may be regaining its footing in the smartphone market, despite stiff competition and regulatory challenges.

The surge in Apple‘s shares following its report lifted its stock market value by over $160bn.

Apple said fiscal second-quarter revenue fell 4 per cent to $90.8bn, beating the average analyst estimate of $90.01bn, according to LSEG data.

For Apple‘s current quarter, which ends in June, Cook told Reuters the iPhone maker expects “to grow low-single digits” in overall revenue. Wall Street expected 1.33 per cent revenue growth to $82.89bn, according to LSEG data.

Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling 10 per cent this year as it struggles with weak iPhone demand and tough competition in China.

Apple expects current-quarter services and iPad revenue to grow by double digits, CFO Luca Maestri told analysts on a conference call. The company expects gross margins of between 45.5 per cent and 46.5 per cent for the fiscal third quarter.

Apple faces a raft of challenges across its business. Smartphone rivals such as Samsung Electronics have introduced competing devices aimed at hosting artificial-intelligence chatbots.

On the regulatory front, Apple‘s services business, which contains its lucrative 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 monopolising the smartphone market and driving up prices.

For the fiscal second quarter, iPhone sales fell 10.5 per cent to $45.96bn, compared with analyst expectations of $46bn. Apple executives said in February that the year-ago fiscal second quarter had benefited from a $5bn surge in iPhone sales as the company caught up from supply-chain snarls during pandemic lockdowns.

Excluding that one-time phenomenon, iPhone sales were down only slightly as the Cupertino, California, company’s signature product faces stiff competition. In China, Huawei Technology has gained market share.

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

Apple‘s revenue decline in China was not as steep as analysts expected, with Greater China sales of $16.37bn for the fiscal second quarter that ended March 30, down 8.1 per cent and above analyst expectations of $15.59bn, according to data from Visible Alpha.

Apple has said little about its product plans for artificial intelligence, the technology on which rivals Microsoft and Alphabet’s Google are placing huge bets. The company started ramping up research and development spending last year, and Cook said the company has spent more than $100bn on R&D in the past five years.

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

As it races to bring AI into its products, Apple‘s massive buyback programme may appease investors who have been bruised by its sinking stock price.

“It’s certainly a great time to resort to this strategy as, on the one hand, the stock remains relatively fairly priced, and, on the other hand, it needs to garner solid support for a structural shift that may very well take several quarters to play out,” Investing.com analyst Thomas Monteiro said in a client note.