5/7/2024

Apple announces $110 billion share buyback

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Key points:

  • Apple exceeded modest investor expectations by announcing a record $110 billion share buyback program.
  • The company raised its quarterly dividend by 4%.
  • Quarterly revenue, although showing a decline, was higher than analysts’ forecasts.

On Thursday, May 2, Apple released quarterly results and guidance that exceeded modest investor expectations. The company’s shares rose 6% in after-hours trading after Apple announced a record share buyback program.

The company also announced a dividend increase, which further pleased traders.

Apple’s Q1 report

Apple announced a 4% increase in its quarterly dividend and also approved a new $110 billion share buyback program, the largest buyback in the company’s history.

Although Apple’s quarterly revenue declined, the decline was less significant than analysts had predicted.

These results and subsequent recommendations indicate a possible recovery of the company’s position in the smartphone market, despite stiff competition and regulatory challenges.

Following the release of the report, Apple shares rose, increasing the company’s market capitalization by more than $160 billion.

It’s worth noting that Apple’s fiscal second-quarter revenue fell 4% to $90.8 billion, but beat analysts’ average estimate of $90.01 billion.

Apple forecasts

Apple forecast “low-digit overall revenue growth” for the current quarter ending in June. Apple stock, long considered a must-hold on Wall Street, has lagged other big tech stocks in recent months, falling 10% this year. In particular, the drop is due to weak iPhone demand and stiff competition in China.

Despite these challenges, Apple expects services and iPad revenue to grow by double digits in the current quarter, Chief Financial Officer Luca Maestri told analysts on a conference call.

The company also expects fiscal third-quarter gross margins to range from 45.5% to 46.5%.

It’s worth noting that Apple hasn’t provided details about its plans for artificial intelligence, a technology on which rivals Microsoft and Alphabet have made huge bets.

Apple’s quarterly earnings per share were $1.53, beating Wall Street’s estimate of $1.50.

Challenges for the company

Apple’s business faces a number of challenges that could negatively impact its future prospects. First, the company is facing increasing competition from other smartphone makers such as Samsung Electronics. The South Korean manufacturer recently unveiled devices designed to host artificial intelligence chatbots, which could undermine Apple’s dominance in this area.

Secondly, Apple is under pressure from regulators. Apple’s services business, which includes the lucrative App Store, was one of the few areas of growth in the fiscal second quarter. However, this business is under threat due to a new law passed in Europe. In addition, the US Department of Justice in March accused Apple of monopolizing the smartphone market and inflating prices. These legal issues could result in significant fines and force Apple to change its business practices.

Additionally, sales of iPhone, Apple’s flagship product, fell 10.5% to $45.96 billion in the fiscal second quarter, below analysts’ expectations of $46 billion.

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