Everyone knew this would be a rough quarterly earnings report, but the question was just how rough. Facing broader economic headwinds and a slowing smartphone market, Apple reported its second straight quarterly sales drop. Still, the company managed to beat Wall Street forecasts, on the strength of better-than-expected iPhone revenue.
Apple itself issued no formal guidance ahead of earnings, a move implemented and maintained since the earliest days of the pandemic. Apple sold $51.3 billion worth of iPhones for Q2, beating an expected $48.8 billion for the quarter. The category’s growth amounted to only 2% for the quarter, but it’s still being regarded as a win.
“We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high,” Tim Cook said in a release. “We continue to invest for the long term and lead with our values, including making major progress toward building carbon neutral products and supply chains by 2030.”
The broader smartphone market has stagnated and begun to contract, owing to financial concerns and various factors limiting demand. Apple certainly hasn’t been immune to such stresses, but the company is believed to have benefited from a boast from supply chain corrections.
The bump in iPhone sales is especially critical as the company failed to hit revenue forecasts for the Mac, iPad and other hardware. Even services, which have been the key for the company as it shifts away from a dependency on consumer hardware, fell short of expectations. Mac revenue, which was expected to hit $7.8 billion for the quarter, came in at $7.2 billion. In a recent study, analyst firm Canalys noted a 40.5% drop in Mac shipments for Q2. It was a bad quarter for PC sellers all around, but Apple was hit especially hard.
iPad just barely fell short, 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, reached $20.91 billion, just short of the expect $20.97 billion.
Given a difficult business climate for growth, all eyes are on the company’s stock repurchases as a way to drive investor return. Apple delivered: “Given our confidence in Apple’s future and the value we see in our stock,” says CFO Luca Maestri, “our Board has authorized an additional $90 billion for share repurchases. We are also raising our quarterly dividend for the eleventh year in a row.”
The company has, thus far, managed to buck the industry trend of wide-scale layoffs, which have impacted competitors like Google, Amazon and Meta. In an interview with CNBC, Cook said layoffs are not on the immediate horizon for Apple. “I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” the exec explained.
Shares of Apple lost just under 1% during regular trading hours, and after reporting its earnings it has rallied just over 1%. Put another way, Wall Street has digested the company’s aggregate results, new buyback authorization and rising dividend and decided to not change the company’s value materially. That could change after its earnings call, but for now Apple has, at a minimum, defended its $2.6 trillion market cap.