Apple is taking a “thoughtful” approach when it comes to “weaving” A.I. into its products.
That’s according to Tim Cook, who was “pleased to report” record high services revenue and a March quarter record for iPhone sales on Thursday afternoon.
The company’s results were almost an afterthought — or as much of an afterthought as Apple results can be. Cook’s mega-cap compatriots all delivered consensus-topping quarters last week, so even if Apple had disappointed, it wouldn’t have much mattered.
But they didn’t. Disappoint, I mean. Revenue of $94.84 billion was a solid beat ($2 billion ahead of the Street), even as it did mark a second consecutive decline. EPS was flat YoY, but $1.52 beat by a dime.
Cook cited a “challenging macroeconomic environment.” For the current quarter, revenue will probably fall by the same amount, Apple said on the call.
iPhone sales of $51.3 billion beat comfortably, although growth was slow — less than 2% compared to the same period in 2022. iPad and Mac sales both fell sharply, but the declines were expected. The hodgepodge of offerings included in home and wearables brought in $8.76 billion, more than analysts projected.
While Cook was keen to tout a new high mark for services revenue, $20.91 billion across Apple Music, iCloud, TV+ and the App Store was a slight miss. And yet, services stood out as the sole business line to record respectable YoY top-line growth.
Apple raised its quarterly dividend and announced another $90 billion in buybacks. Luca Maestri was proud of the $23 billion the company returned to shareholders in fiscal Q2, and said the higher dividend and additional repurchases reflect “confidence in Apple’s future.”
At the risk of trivializing an earnings report from the most valuable company on Earth, this was a nonevent.
Commenting further on A.I., Cook noted that Apple already leverages it in some products and said the potential is “certainly very interesting.” “I do think it’s very important to be deliberative and thoughtful,” he added. “There [are] a number of issues that need to be sorted.”
AAPL call was indeed uneventful. Estimates went down during the quarter, print beat the lowered estimate. Revenue -2.5% YOY including a 500 bp FX headwind, margins fine, cash flow prodigious. iPhone +1.3% YOY, Mac -31%, iPad -12%. Services +5.5%, decelerating at a slower rate than recent quarters. US -8%, Europe up a little, China -3%, Japan down, the star was Other +17% with lots of gushing over India.
Guided Jun quarter to YOY growth “similar” to Mar qtr despite slightly less (400 bp?) FX drag, which implies revenue below consensus. Rest of guidance implies EPS below consensus with margins sequentially down. Jun qtr estimate should go down, not a lot. AAPL is pretty good at guiding to beat. $90BN buyback authorization but only raised dividend a penny.
In this environment, a flattish quarter and a trim to next quarter feels like – a B+? Not as good as some other mega-techs, whose estimates went up, but AAPL hasn’t had to RIF its way to a beat either (layoffs a “last resort”, says Cook). Hard to inject any AI or AR excitement into the AAPL story, but also hard to come up with existential risks. Overvalued but short of negative catalysts. It’s the new Quality Defensive Safety stock, I guess, even without a respectable dividend.