Apple beats Q2 estimates with iPhone sales down 10%

Apple (AAPL) reported second-quarter results Thursday that showed sales fell less than expected during the quarter while earnings beat estimates, sending shares up about 6% in premarket trading on Friday.

Apple’s revenue in Greater China, which includes mainland China, Taiwan, Singapore and Hong Kong, fell 8% year-on-year to $16.37 billion. However, that was better than the $15.87 billion analysts expected. The company’s significant iPhone revenue reached $45.96 billion, down from $51.33 billion in the second quarter of last year.

Overall, Apple reported earnings per share (EPS) of $1.53 and revenue of $90.8 billion. Wall Street had expected earnings per share of $1.50 on revenue of $90.3 billion, according to analyst estimates compiled by Bloomberg.

The company also announced that it authorized an additional $110 billion in stock buybacks and increased its dividend to $0.25 per share.

Apple is dealing with the combination of a rising Huawei and a slowing economy in China, which is reducing its sales. However, Apple CFO Luca Maestri told Yahoo Finance’s Josh Lipton that the company has seen growth in mainland China.

The company’s stock price is down 10% year-to-date and 2% in the past 12 months. Meanwhile, shares of rival Big Tech companies like Microsoft (MSFT) and Google (GOOG, GOOGL) have risen 30% and 58% over the past year, respectively.

Mac revenue was $7.45 billion versus $6.79 billion expected, while iPad revenue was $5.55 billion. Analysts had expected $5.91 billion. Wearable devices, which include AirPods, Apple Watch and Vision Pro, saw revenues of $7.91 billion. Wall Street was looking for $8.28 billion.

But there was one bright spot for Apple this quarter: Services revenue was $23.87 billion, compared to $20.91 billion last year, an all-time record. Analysts had expected $23.28 billion.

Apple is also gearing up for the Worldwide Developers Conference (WWDC) in June, where it will unveil the latest versions of iOS, macOS, watchOS, iPadOS, and VisionOS. Probably one of the biggest announcements at the show will be how Apple will integrate generative AI into its various products.

The company is late to the generative AI party, with competitors across major tech companies already rolling out their own product offerings for consumers and enterprise customers. But that doesn’t mean Apple was twiddling its thumbs. The company has been busy buying up AI companies and building its own large language model to support its AI efforts. Maestri told Yahoo Finance that the company is making significant investments in generative AI technologies.

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Apple is also looking to work with OpenAI, Google and others to elevate its AI offerings. According to Mark Gurman of Bloomberg.

Generative AI is still a relatively niche product among consumers. Sure, Google and Samsung are offering AI capabilities on their smartphones, and PC makers are increasingly leaning into so-called AI PCs, but the apps still look largely like technology demos rather than game-changing features that will deliver. To increase sales significantly. Apple has the opportunity to change that.

Update: This article has been updated to reflect the change in Apple’s revenue estimates in Greater China.

Email Danielle Hawley at [email protected]. Follow him on Twitter at @Daniel Holly.

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