Everyone knew this would be roughly a quarterly earnings report, but the question was how roughly. In the face of broader economic headwinds and a slowing smartphone market, Apple reported its second straight quarterly sales decline. However, the company was able to beat Wall Street’s expectations, on the strength of better-than-expected iPhone revenue.
Apple itself hasn’t issued any official pre-earnings guidance, a move that’s been done and continued since the early days of the pandemic. Apple sold $51.3 billion worth of iPhones for the second quarter, beating the expected figure of $48.8 billion for the quarter. Category growth was only 2% in the quarter, but it’s still seen as a win.
“We are pleased to report an all-time record for services and a quarterly record for iPhone despite a challenging macro environment, and that our installed base of active devices is at an all-time high,” Tim Cook said in a statement. “We continue to invest for the long term and lead by our values, including making significant progress toward building carbon neutral products and supply chains by 2030.”
The broader smartphone market has stagnated and started to shrink due to financial concerns and various factors limiting demand. Apple certainly wasn’t immune to such pressures, but the company is believed to have profited by flaunting supply chain patches.
The uptick in iPhone sales is particularly critical as the company has failed to meet revenue projections for the Mac, iPad and other devices. Even services, which have been key for the company as it moves away from reliance on consumer devices, haven’t lived up to expectations. Mac revenue, which was expected to come in at $7.8 billion for the quarter, was $7.2 billion. In a recent study, analysis firm Canalys noted a 40.5% drop in Mac shipments for the second quarter. It was a bad quarter for PC vendors everywhere, but Apple was hit particularly hard.
The iPad barely fell short, coming in at $6.67 billion versus an expected $6.69 billion. Ditto for services. The category, which includes things like iCloud, Apple TV Plus, and Apple Music, came in at $20.91 billion, just under the expected $20.97 billion.
Given the challenging business climate for growth, all eyes are on buying back the company’s stock as a way to increase return for investors. Apple offered: “Because of our confidence in Apple’s future and the value we see in our stock,” Chief Financial Officer Luca Maestri stated, “The Board of Directors has authorized an additional $90 billion in share buybacks. We are also raising our quarterly dividend for the eleventh consecutive year.”
The company has, so far, weathered the industry trend of massive layoffs, which has weighed on competitors like Google, Amazon, and Meta. In an interview with CNBC, Cook said layoffs are not on the immediate horizon for Apple. “I think this is a last resort, and therefore, mass layoffs is not something we’re talking about at this moment,” the CEO explained.
Shares of Apple lost just under 1% during regular trading hours, and after reporting their earnings, were up just over 1%. In other words, Wall Street digested the company’s overall results, the new buyback mandate, and the dividend increase and decided not to materially change the company’s value. That may change after the earnings announcement, but for now Apple has, at least, defended its $2.6 trillion market capitalization.