Apple sales slip, but investors offered bite of $110B stock buyback

Apple has announced the biggest stock buyback in US history: a $110 billion plan to slurp shareholders' scrip.

The buyback was announced alongside its Q2 fiscal 2024 results that saw the iGiant win $90.8 billion of revenue – down four percent year over year. Net income dipped two percent to $23.636 billion. Earnings per share hit a record $1.53 and dividends per share rose four percent to 25 cents.

Sales in greater China fell 8.4 percent year over year to $16.372 billion – a nasty number, but one some analysts feared could be worse as Middle Kingdom consumers and regulators are both increasingly keen on home-grown products. CEO Tim Cook pointed to Apple leading smartphone sales charts in China's urban areas and this quarter representing growth for the iPhone, but admitted Apple's other products aren't faring well in the Middle Kingdom.

Things are better in other markets. Cook proudly told investors Apple had achieved record revenue in Latin America, India, Turkey, the Middle East, Canada, Spain, and Indonesia.

He also said that last year's Q2 revenue was inflated by a rush of products that made it to market after COVID-19-related supply chain problems eased. That one-off saw an extra $5 billion of revenue in Q2 2023 – meaning this year's Q2 result would have represented growth if it weren't for the pesky virus.

Global falls in sales for iPhones, iPads and Apple Watches were attributed to "difficult compares" – we think that means this time last year Apple's products were newer, so buyers' enthusiasm waned this year as they await new kit.

Investors were told that iPad revenue should grow by double digits in the next quarter, and that Apple plans "an exciting product announcement next week." As the teaser for that event features a pencil, it seems sensible to assume it's either an iPad launch or an expansion of Apple's digital stylus range.

The Register found three other line items that represent growth in Apple's statement of operations [PDF]: Mac sales rose by almost $300 million year-over-year, and European revenue ticked up $178 million.

The third winner was services, which jumped from $20.907 billion to $23.867 billion – a new record for Cupertino's various subscription offerings.

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Cook warmed up investors for the debut of generative AI services.

"We are making significant investments," the CEO hinted on Apple's earnings call, later stating "we'll be talking more about it in as we go through the weeks ahead."

Cook described generative AI as "a very key opportunity across our products" and opined that Apple's strategy of building hardware around its own silicon – plus "seamless hardware, software and services integration" – give it an advantage in the field.

A few other items stood out on the earnings call:

• Cook said of India "you need to produce there to be competitive" – a significant remark as India's tech manufacturing industry has only ramped up in recent years.
• CFO Luca Maestri, asked about capital expenditure, dropped a little insight into Apple's datacenter strategy. "We have our own datacenter capacity and then we use capacity from third parties," he revealed. "It's a model that has worked well for us historically and we plan to continue along the same lines going forward."
• Apple earnings calls now often include a preview of upcoming productions that will screen on its TV+ service. This time a flick named "Wolves" rated a mention, with Cook excited that it "reunites George Clooney and Brad Pitt."
• More than half of the Fortune 100 have acquired an Apple VisionPro VR rig, which Cook saw as a good sign they see potential in the device. The Reg cannot recall such enthusiasm for what could be 51 sales of a product.

Financial analysts on the earning call asked just one question about the giant stock buyback, and that didn't even ask the reason for the $110 billion offer. Instead, it concerned how Apple will fund it – a query CFO Luca Maestri mostly batted away with an answer about working towards finding an optimal capital structure.

Maestri also forecast Q3 growth of "low-single-digits in total for the company" but that services are expected to grow at a double-digit rate.

Investors seem to like what they heard: Apple shares popped from around $173 apiece to around $183 in after-hours trading. ®