Apple beats Q2 estimates as iPhone sales fall 10%

Apple ( AAPL ) reported second-quarter results Thursday that showed sales in the quarter fell less than feared, while profits topped estimates, sending shares up 6% in premarket trading Friday.

Revenue in Apple’s Greater China, which includes China, Taiwan, Singapore and Hong Kong, fell 8% year over year to $16.37 billion. However, that was better than the $15.87 billion analysts were expecting. The company’s all-important iPhone revenue topped $45.96 billion from $51.33 billion in Q2 last year.

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

The company also announced it would authorize an additional $110 billion in share buybacks and raised its dividend to $0.25 per share.

Apple is dealing with a one-two punch of a sluggish economy and a resurgent Huawei in China, where its sales are slowing. However, Apple CFO Luca Maestri told Yahoo Finance’s Josh Lipton that the company saw growth in mainland China.

Shares of the company are down 10% year to date and 2% over the past 12 months. Shares of big tech rivals like Microsoft ( MSFT ) and Google ( GOOG , GOOGL ) are up 30% and 58%, respectively, over the past year.

Mac revenue came in at $7.45 billion versus expectations of $6.79 billion, while iPad revenue came in at $5.55 billion. Analysts were expecting $5.91 billion. Wearables, which includes AirPods, Apple Watch and Vision Pro, generated $7.91 billion in revenue. Wall Street was looking for $8.28 billion.

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But there was one bright spot for Apple in the quarter: Services revenue hit $23.87 billion, up from $20.91 billion last year, an all-time record. Analysts were expecting $23.28 billion.

Apple is gearing up for its Worldwide Developers Conference (WWDC) in June, where it will reportedly unveil the latest versions of its iOS, macOS, watchOS, iPadOS and visionOS operating systems. One of the biggest announcements at the show was how Apple will integrate generative AI into its various products.

As competitors across the Big Tech already offer their own products to consumer and enterprise customers, the company is late to the AI ​​building party. But that doesn’t mean Apple is twiddling its thumbs. The company has been busy buying AI companies and building its own large language model to power its AI efforts. Mestri told Yahoo Finance that the company is making significant investments in AI technologies.

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

Generative AI is still a relatively mainstream product among consumers. Sure, Google and Samsung offer buildable AI capabilities in their smartphones, and PC makers are increasingly leaning toward so-called AI PCs, but apps still often feel like tech demos rather than game-changing features that will significantly boost sales. Apple has a chance to change that.

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

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

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