(Bloomberg) — Shares of Apple Inc. jumped in late trading after the company posted stronger-than-expected sales in its latest quarter and forecast a return to growth in the current period, raising optimism that the slowdown is easing.
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Although March quarter revenue fell 4.3% to $90.8 billion, that was better than the $90.3 billion forecast by analysts. Profits also exceeded Wall Street forecasts during the period, and Apple announced the largest share buyback in U.S. history.
Read more: Apple’s $110 billion stock buyback plan is the largest in U.S. history
The results came as a relief to investors who had been waiting for the iPhone maker to emerge from a long slump. Apple reported revenue declines in five of the last six quarters, hurt by a sluggish smartphone market and headwinds in China. The company had warned analysts in February that revenue in the most recent period would fall about 5% from a year ago.
In the current period, Apple expects sales to increase in the low single-digit percentage range. The company forecast that both its iPad and services businesses would grow by double digits, but declined to provide a forecast for the iPhone – its flagship product.
Shares rose as much as 7.9% in extended trading on Thursday following the release of the report. Apple was down 10% this year to $173.03 by the close.
In the fiscal second quarter ended March 30, earnings were $1.53 per share. That beat analysts’ estimate of $1.50. Apple increased its dividend by 4% to 25 cents per share, as expected. And the board approved plans to buy back $110 billion more of the company’s stock.
A lack of innovative new devices has contributed to Apple’s declining sales, but the company plans to remedy the situation on May 7. Then it wants to introduce new iPads – the first updates to its tablet series in a year and a half.
Read more: Apple hosts launch event on May 7th and expects new iPads
The Cupertino, California-based company is also planning a long-awaited foray into generative artificial intelligence. In June, Chief Executive Officer Tim Cook is expected to present Apple’s AI strategy at the annual Worldwide Developers Conference.
“We are making significant investments in this area,” Chief Financial Officer Luca Maestri told Bloomberg Television’s Emily Chang. “We believe we are well positioned.”
Cook said Thursday that Apple will differentiate itself from its AI rivals by tightly integrating hardware and software, using in-house chips and prioritizing privacy and security.
Apple’s slowdown in China has been a particular concern for investors in recent months. Consumers there are flocking to domestic smartphone brands, and the government has banned the use of foreign technology in some offices.
Counterpoint Research estimated that sales of the iPhone in China fell 19% in the first three months of the year, the product’s worst quarter since 2020. Globally, shipments of the device fell nearly 10% in the quarter, according to IDC the sharpest decline since Covid lockdowns crippled supply chains in 2022.
With this in mind, Apple’s China results were more positive than expected. The company generated $16.4 billion in sales in Greater China last quarter. Although this figure was down from the previous year, it significantly exceeded the $15.9 billion forecast by analysts.
Read more: Apple’s iPhone sales in China plunge 19% in worst quarter since 2020
Maestri said the China concerns were overblown. “We were happy with our results in China,” he said. “The reality may sometimes look different than what you read.”
Cook also disputed the notion that the iPhone had suffered in the country, saying that revenue from the device had actually increased in mainland China. The weakness was due to other areas of the business, he said.
“Other products didn’t perform as well,” he said in a conference call. “And we clearly still have a lot of work to do.”
At the same time, Apple has not shown that new product categories can revive growth. In February, work on a self-driving car was halted, scuttling a project that some had hoped would be one of his famous “next big things.”
The company has forayed into the mixed reality headset market this year with the launch of the Vision Pro on February 2nd. But this product is off to a slow start and it could be years before it contributes significantly to Apple’s revenue. Apple didn’t disclose sales figures for Vision Pro on Thursday, but said the device is drawing interest from corporate customers.
The company’s biggest moneymaker remains the iPhone, which accounts for about half of its sales. The product posted second-quarter sales of $46 billion, beating estimates of $45.8 billion. That was a significant drop from the $51.3 billion Apple reported in the same quarter last year – even though the latest model was seen as a significant upgrade.
Apple plans to upgrade the iPhone this year with slightly larger screens and new AI-focused chips. The Pro models will also add a new button for taking photos and videos, but otherwise look the same as current versions.
The iPad business continued its decline in the most recent quarter, totaling $5.56 billion in revenue. This missed the average analyst estimate of $5.91 billion. For the first time in product history, Apple has refrained from upgrading the iPad hardware for an entire calendar year. The device will perform better in the current quarter as pent-up demand will boost sales of models scheduled to be unveiled next week.
The Mac brought in $7.45 billion in sales, beating the $6.79 billion forecast. Business received a boost from the new MacBook Air, which was updated with an M3 chip in March. According to Bloomberg News, Apple plans to launch its first Macs with M4 processors later this year, putting a new focus on AI capabilities.
Read more: Apple revamps entire Mac lineup with AI-focused M4 chips
Apple’s Wearables, Home and Accessories segment generated revenue of $7.91 billion. This compares to estimates of $8.29 billion and represents a decline of nearly 10% from the same quarter last year. The latest Apple Watch models were only minor upgrades, and the company has settled the litigation in Connection with a deactivated function for calculating blood oxygen saturation not included.
Services was a relative bright spot, increasing revenue 14% to $23.9 billion. That beat Wall Street expectations of $23.3 billion. The category includes Apple Music, streaming platform TV+ and iCloud subscriptions, but revenue comes primarily from the App Store.
This business is under pressure from regulators as Apple is forced to allow third-party marketplaces and payment services in the European Union. Depending on how Apple fares in a legal battle with the Justice Department, the company may also have to make changes in the US.
During the call, Apple executives praised the company’s growth in emerging markets. That includes all-time record sales in Indonesia, where Cook visited last month during a trip to Southeast Asia.
“These are markets where our market share is small,” Cook said. “The populations are large and growing. And our products are really making great progress.”
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