“We have passed the bottom”
Apple convinces investors with optimism
May 3, 2024, 1:05 a.m
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Weak iPhone sales are again depressing Apple’s sales, but it’s not as bad as analysts expected. Company boss Cook explains that thanks to AI, the lean times are over. His optimism is contagious, and the share price increases significantly.
A robust services business and the sales success of new laptop models make Apple optimistic. After five declines in sales in six quarters, the trough has been passed, said company boss Tim Cook. The electronics group is pinning its hopes, among other things, on new functions with artificial intelligence (AI), which are expected to come onto the market in the coming months. To underline the increased optimism, Apple announced that it would buy back additional shares worth $110 billion. This is the largest buyback program in the company’s history, said analyst Thomas Monteiro from online broker Investing.com. In addition, the dividend is to be increased by four percent.
Apple shares then rose by seven percent in after-hours US trading. At the start of the year, group sales reportedly fell by four percent to $90.8 billion. However, experts had expected a decline to $90.01 billion. For the current quarter, company boss Cook forecast a low single-digit percentage increase. Analysts had previously predicted growth of 1.3 percent.
iPhone is weak, but…
The iPhone, which contributes half of the group’s revenue, once again caused concern for Apple in the reporting period. It has to prove itself against the increased competition from Samsung and Huawei. Apple’s revenue from smartphone sales fell more than ten percent to $45.96 billion, the most since more than three years ago. However, sales have increased in the important and highly competitive Chinese market, emphasized Cook. Therefore, the decline in sales in the People’s Republic of 8.1 percent was also lower than feared.
Revenue from the service business, which includes the streaming service Apple TV+, grew surprisingly significantly to $23.87 billion. The feared decline in sales of Mac computers did not materialize. Instead, revenue rose to $7.5 billion. “The driving force was the new MacBook Air with the M3 chip,” said company boss Cook. “About half of our MacBook Air buyers this quarter were Mac newbies.”
On the other hand, sales of tablets were disappointing, falling to $5.56 billion. However, Apple has invited people to an event on May 7th where a new generation of iPad is expected to be presented. At this event, Cook could also announce the first new AI functions. “We remain very optimistic about our opportunities in the area of generative AI,” said the Apple boss. His company is investing heavily in this area. According to a media report, Apple wants to use the technology of the ChatGPT developer OpenAI or the AI ”Gemini” from the Alphabet subsidiary Google. This could bring a surge in demand for the next generation of iPhones, predicted analyst Toni Sacconaghi from asset manager Bernstein. This also applies to China, where Apple recently lost market share to local competitors. Customers there often made their purchasing decisions dependent on new functions.