Everyone knew this would be a rough quarterly report, but the question was how rough. Facing broader economic headwinds and a slowing smartphone market, Apple reported its second consecutive quarterly revenue decline. Still, the company managed to beat Wall Street’s forecasts thanks to better-than-expected iPhone revenue.
Apple itself does not issue formal guidance in advance of earnings, a move that has been implemented and enforced since the early days of the pandemic. Apple sold $51.3 billion worth of iPhones in the second quarter, surpassing the $48.8 billion expected for the quarter. The category grew just 2% for the quarter, but is still considered a win.
“We are pleased to report a record services and quarterly record for iPhone in March despite the challenging macroeconomic environment, and that our installed base of active devices reached an all-time high,” Tim Cook said in a release. “We continue to invest for the long term and lead with our values, which include making major strides toward building carbon-neutral products and supply chains by 2030.”
The broader smartphone market has stagnated and started to contract due to financial concerns and various factors limiting demand. Apple certainly hasn’t been immune to such tensions, but the company is believed to have benefited from the boast of supply chain corrections.
The increase in iPhone sales is especially critical as the company fell short of sales forecasts for the Mac, iPad and other hardware. Even services, which have been key for the company as it shifts from its reliance on consumer hardware, fell short of expectations. Mac revenue, which was expected to be $7.8 billion for the quarter, came in at $7.2 billion. In a recent study, analyst firm Canalys found a 40.5% drop in Mac shipments for the second quarter. It was a bad quarter for PC sellers everywhere, but Apple was particularly hard hit.
iPad fell just short, at $6.67 billion versus an expected $6.69 billion. Same for services. The category, which includes things like iCloud, Apple TV Plus, and Apple Music, reached $20.91 billion, just short of the $20.97 billion expected.
Given the difficult business environment for growth, all eyes are on the company’s share buybacks as a way to boost returns for investors. Apple has delivered: “Given our confidence in the future of Apple and the value we see in our stock,” said CFO Luca Maestri, “our board of directors has authorized an additional $90 billion for the buyback of its own We are also increasing our quarterly dividend for the eleventh year in a row.”
The company has so far managed to counter the industry trend of massive layoffs that have impacted competitors like Google, Amazon and Meta. In an interview with CNBC, Cook said layoffs are not in the offing for Apple. “I see that as a last resort and mass layoffs so not something we’re talking about right now,” the exec explained.
Shares of Apple lost just under 1% during regular trading hours, and after reporting earnings, it’s up just over 1%. In other words, Wall Street has processed the company’s total results, the new buyback authorization and the rising dividend and has decided not to materially change the value of the company. That could change after the earnings call, but for now Apple has at least defended its $2.6 trillion market cap.