Apple’s recent quarterly performance for FY 2Q24 surpassed market expectations, showcasing resilience and adaptability despite challenges. Key highlights include exceeding revenue, operating income, and EPS consensus estimates, driven by robust service revenue growth and improved margins. Additionally, Apple’s positive guidance for FY 3Q24 and a record-breaking share repurchase plan underscore its optimistic outlook and commitment to shareholder value. The company’s performance in China, coupled with its initiatives in the AI field, further enhance its growth prospects.
Exceeding Expectations
- Financial Highlights
- Revenue: $90.8 billion (YoY -4.3%)
- Operating Income: $27.9 billion (YoY -1.5%)
- EPS: $1.53 (YoY +0.7%)
- Surpassing Consensus Estimates:
- Exceeded revenue, operating income, and EPS estimates by 0.5%, 0.9%, and 1.9%, respectively.
- Excluding one-time revenue from FY 2Q23, revenue would have shown year-over-year growth.
- Margin Improvement:
- Gross margin: 46.6% (vs. consensus 46.6%), attributed to service revenue expansion and cost-saving measures.
- Operating margin: Improved to 30.7% from 29.9% in FY 2Q23.
- Product Revenue Breakdown:
- iPhone: $46 billion (YoY -10.5%)
- iPad: $5.6 billion (YoY -16.7%)
- Mac: $7.5 billion (YoY +4.0%)
- Other wearable devices: $7.9 billion (YoY -9.6%)
Apple’s recent financial report has showcased remarkable performance, surpassing expectations across key metrics. Despite facing challenges, the company has proven its resilience and strength in the technology sector. With revenue reaching $90.8 billion, although down 4.3% year-over-year, Apple has demonstrated its ability to generate substantial sales even in competitive markets. Operating income stood at $27.9 billion, reflecting a slight decline of 1.5%, yet highlighting the company’s ongoing profitability. An EPS of $1.53 marked a 0.7% increase from the previous year, exceeding consensus estimates by 1.9%. Notably, if one-time revenue from the previous year is excluded, Apple’s revenue would have shown year-over-year growth, indicating a stronger underlying performance. Improvements in margins were also notable, with the gross margin reaching 46.6%, slightly higher than expected. Operating margin improved to 30.7% from 29.9% in the previous year, reflecting enhanced operational efficiency.
Positive Guidance Issued
- FY 3Q24 Outlook:
- Anticipated low single-digit revenue growth compared to the previous year.
- Expected growth in service revenue and double-digit growth forecasted for iPad revenue.
- Gross margin guidance: 45.5% to 46.5%.
- Segment Guidance:
- Service revenue: $23.9 billion (YoY +12.7%)
- Product revenue: $59.5 billion (YoY -1.7%)
- AI Initiatives:
- Plans to unveil AI-related initiatives at the upcoming annual developer conference next month.
Apple has provided positive guidance for the future, instilling confidence in investors and stakeholders alike. For the upcoming quarter, Apple anticipates low single-digit revenue growth compared to the previous year, with service revenue expected to maintain the growth trajectory observed in the first half of the year, showing an increase of 12.7% year-over-year. Additionally, iPad revenue is forecasted to experience double-digit growth, reflecting optimism about the product’s performance. The company’s guidance includes a gross margin range of 45.5% to 46.5%, coupled with operating expenses of $14.3 billion to $14.5 billion, other income of $50 million, and a tax rate of 16%. These figures are expected to contribute to an estimated revenue of $83.4 billion, marking a 2.0% increase year-over-year, and an EPS of $1.32, reflecting a 4.5% increase.
Record-Breaking Share Repurchase Plan
- Shareholder Return:
- Executed total shareholder return of $27 billion, including dividends and share repurchases.
- Approved a $110 billion share repurchase program, raising the dividend by 4% to $0.25 per share.
- Reflects confidence in Apple’s financial position and commitment to enhancing shareholder value.
Apple’s recent announcement of a record-breaking share repurchase plan underscores its commitment to shareholder value. In FY 2Q24, the company executed a total shareholder return of $27 billion through dividends and share repurchases. Alongside its earnings report, Apple approved a $110 billion share repurchase program, a significant increase from the previous year’s authorization. Additionally, the dividend was raised by 4% to $0.25 per share. These aggressive shareholder return strategies reflect Apple’s confidence in its financial position and future prospects, aiming to enhance shareholder wealth and reinforce investor trust.
China Shows Better Performance Than Expected
- Market Performance:
- Chinese revenue exceeded market consensus, signaling resilience despite challenges.
- Optimism for improved iPhone sales if the Chinese smartphone market starts to recover.
- AI Initiatives:
- Pursuing collaborations in the AI field, with potential offerings including paid subscription AI services and AI-equipped smartphones.
Despite concerns over weak demand, Apple’s performance in China surpassed expectations. While iPhone sales in the region declined 8% year-over-year, excluding supply chain disruptions, Chinese revenue actually grew. This quarter, Chinese revenue exceeded market consensus, indicating a positive shift. Despite flat smartphone shipments in China overall, signs of recovery in consumer spending offer hope for iPhone sales. Apple’s proactive collaborations in the AI field further bolster optimism for future growth opportunities in the region.
Apple’s FY 2Q24 performance exceeded expectations, with revenue, operating income, and EPS surpassing consensus estimates. Margins improved, driven by service revenue expansion and cost-saving measures.
Positive guidance for FY 3Q24 includes anticipated revenue growth and double-digit growth in iPad revenue.
A record-breaking share repurchase plan and dividend increase demonstrate Apple’s commitment to shareholder value. Despite concerns, Apple’s performance in China and initiatives in the AI field bode well for future growth.