Apple shares rise after iPhone bounces back, core estimates beat sales

(Bloomberg) — Apple Inc . Shares rose in premarket trade after reporting a rebound in iPhone sales last quarter, helped by higher earnings estimates for the world’s most valuable company and countering an industry downturn that has affected much of its product line.

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Apple said Thursday that overall revenue for the fiscal second quarter was $94.8 billion, beating analysts’ forecast of $92.6 billion. Although sales fell 2.5% during the period, the company warned that investors could expect a drop of about twice that.

The results suggest that Apple is starting to recover from the slump that hit both the PC and smartphone industries. That was some relief to investors after Qualcomm Inc., a key supplier, raised fresh concerns about phone demand earlier this week. Apple’s sales in China — a weak spot for other tech companies — came in slightly better than expected.

As expected, Apple announced plans to buy back $90 billion in shares — the same as last year’s plan. The company raised its quarterly dividend by 4% to 24 cents.

Shares rose 2.2% in premarket trading on Friday. It closed at $165.79 in New York on Thursday, up 28% for the year.

While the performance was better than expected, it marked two consecutive quarters of sales declines — Apple’s first since the pandemic began. Meanwhile, earnings were unchanged from a year ago at $1.52 a share. Compared to an average valuation of $1.43 a share.

In a conference call with analysts, Apple said it expected revenue to decline in the current quarter, as it did in the previous quarter ended April 1. This represents a decline of about 3%. The company also said that the negative impact from foreign exchange rates will continue.

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Apple generated $51.3 billion in sales from the iPhone — its flagship product — in the second quarter, topping analysts’ forecasts of $49 billion. That was a 1.5% increase from a year ago but marked a record performance in the March quarter, CEO Tim Cook said. The increase was “despite a challenging macroeconomic environment,” he said in the statement.

Like many tech CEOs who deliver earnings reports, Cook discussed artificial intelligence. He said it has enormous potential and that Apple will pursue it with “very thoughtful” products.

Also Read: Apple’s Tim Cook Says AI Concerns Still Need To Be Sorted Out

From a supply perspective, the iPhone 14 was likely to make a comeback in the second quarter. The device was hit by restrictions in the previous period due to Covid policies in China.

iPad revenue fell 13% to $6.67 billion, roughly in line with estimates of $6.7 billion. The new models, which include an updated entry-level version and Pro models with M2 chips, didn’t do much to spur purchases in the quarter.

Likewise, revenue in the Mac segment fell 31% to $7.17 billion. That beat forecasts of $7.7 billion. Research firms have already warned of a bleak quarter for the lineup, with IDC estimating that Mac shipments fell about 40% in the quarter. Apple upgraded the MacBook Pro and Mac Mini, adding faster processors, but they failed to boost sales of the unit again.

The home, wearables and accessories segment — which includes AirPods, Apple Watch and TV set-top boxes — fell less than 1% to $8.76 billion. It won a valuation of $8.5 billion. The company added a faster app to Apple TV in the holiday quarter and refreshed its HomePod speaker in the March quarter.

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The services business, which includes iCloud, Apple Music, the App Store and the TV+ streaming service, earned $20.91 billion, missing estimates of $21.1 billion. However, this is 5.5% higher than the previous year. Last quarter, Apple promised that services revenue — along with the iPhone — would accelerate.

The company performed particularly well in emerging markets, Cook said, pointing to quarterly sales recorded in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the United Arab Emirates. If you keep the currencies stable the company’s overall sales will go up, he said.

For Apple and other U.S. companies with a global footprint, the strong dollar has eroded the value of revenue generated in other parts of the world.

“Despite these challenges, we continue to manage for the long term,” Cook said.

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