Apple's revenue fell less than expected despite a difficult start to the year

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Apple shares rose Thursday after beating analysts' pessimistic quarterly revenue forecasts and executives projected a positive outlook for the year despite a bumpy start to 2024.

The technology company reported revenue of $90.75 billion in the first three months of 2024, down 4 percent from a year earlier but slightly above consensus estimates of $90.3 billion. Sales of the flagship iPhone fell 10 percent from the previous year, reaching $46 billion, compared to $51.3 billion the previous year, and sales in China – a region that investors are particularly focused on – fell to $16.3 billion during the quarter, compared to $17.8. Billion dollars a year ago.

But investors feared this quarter would be worse, and Apple shares rose 6 percent after the earnings announcement. It also announced another $110 billion in stock buybacks and raised its quarterly dividend by 4 percent.

Despite some concerns about its core business, Apple expects big product launches that can offset a rocky start through 2024. It expects low-single-digit growth for its hardware business, with continued strong growth in services. Over the past quarter, services revenue — which includes the App Store, Apple TV and Apple Pay — rose 14 percent to a record $23.9 billion.

On an earnings call following the results, CEO Tim Cook was optimistic about the prospects for new generative AI features that will boost hardware sales and promised more details “in the coming weeks.”

Analysts hope that Apple can boost sales of its smartphones and laptops by unveiling long-awaited new features, likely at its developer conference in June. It also launched the Vision Pro headset in February, and is expected to unveil the new iPad model at an event in May.

“I think the biggest thing is that the company is holding together and positioning itself for what should accelerate growth over the next three quarters,” said Gene Munster of Deepwater Asset Management. “That's why the stock is up.”

Munster said the stock buyback exceeded his $90 billion estimate, and he predicted Apple was “confident” about the rest of the year.

Apple shares are down 7 percent year-to-date as of Thursday's close. It has once again lost its position as the world's most valuable listed company to Microsoft.

Since January, Apple has seen the cancellation of a years-long car project, mounting pressure from antitrust authorities in the United States and the European Union, and declining iPhone sales in China.

A report issued by Counterpoint Research last month said that iPhone sales in the country fell by 19 percent year-on-year in the first three months of the year, while market research firm International Data Corporation said that the company lost its leadership in the global smartphone market to Samsung as tray. Rivals such as Xiaomi and Huawei made gains as the broader market rebounded.

Apple CFO Luca Maestri told the Financial Times that iPhone sales remain strong in China, despite it being “the most competitive smartphone market in the world,” with the number of active Apple devices reaching an “all-time high.”

Meanwhile, Cook stressed that even as sales in Greater China declined year-on-year, they were still accelerating compared to the previous quarter, driven by the iPhone.

The $110 billion stock buyback showed that we feel good about the company's position, [and] “We have great confidence in what we have in store for our customers,” Maestri said, adding that a “very busy period” is coming in terms of new products.

Apple's stock buyback and larger-than-expected dividend hike continues the theme of big tech companies offering bigger rewards to investors. Last week, Alphabet, Google's parent company, announced its first dividend, sending its shares higher, following Meta, which did so in February.

Apple has also come under intense pressure from regulators on both sides of the Atlantic. The US Department of Justice filed an antitrust lawsuit against the tech giant in March. In the same month, the European Union opened an investigation into Apple's possible failure to comply with the Digital Markets Act. It also imposed a fine of 1.8 billion euros on Apple over the rules it applies to competing music streaming services on its App Store.

Diluted EPS for the quarter was $1.53, compared to consensus estimates of $1.50, up from $1.52 a year ago. Total income was $23.6 billion, higher than the consensus estimate of $23.2 billion.