Topline
Apple beat Wall Street’s expectations in its quarterly earnings report Thursday afternoon, despite the worst iPhone sales in years, as hype builds ahead of the artificial intelligence iPhone’s launch later this year.
Apple CEO Tim Cook.
Key Facts
Apple reported $1.40 earnings per share ($21.5 billion net income) in the three-month period ending June 29, topping consensus analyst estimates of $1.34 ($20.7 billion), according to FactSet, with earnings growing 11% year-over-year.
The tech giant raked in $85.8 billion of revenues, besting forecasts of $84.4 billion, rising 5% annually thanks to $39.3 billion of iPhone sales, above projections of $38.6 billion.
Apple generated $14.73 billion in revenue from its previously high-growth greater China region, a 7% year-over-year dip and well short of estimates of $15.7 billion, making it the fourth consecutive quarter of China declines for Apple.
It’s Apple’s best-ever June quarter by earnings per share and revenue.
Shares climbed about 1% in after hours trading, moving against the significant drops experienced by shares of fellow big tech companies reporting earnings Thursday afternoon, Amazon and Intel.
Surprising Fact
Apple’s iPhone revenue was still its lowest mark since the quarter ending September 2021, and declined 1% from 2023’s comparable period. Analysts expect iPhone sales to pick back up later this year upon the iPhone 16’s release and the release of its generative artificial intelligence’s operating system, which will only operate on newer devices. Consensus forecasts of $73 billion in iPhone sales during 2024’s holiday quarter would be a record for Apple.
Key Background
The AI iPhone hype following Apple’s June 10 announcement of “Apple Intelligence” sent Apple stock surging as the company teased the incorporation of OpenAI’s viral generative AI chatbot ChatGPT into the iPhone voice assistant, Siri. Apple shares rose as much as 22% after the AI unveiling to a record high, vaulting Apple’s world-leading market value as high as $3.6 trillion. The stock has since cooled off, down about 7% over the last two weeks during the broader technology stock slump, but Apple shares remain up 13% year-to-date. Apple is easily the most profitable U.S. company, raking in some $97 billion in net income during its 2023 fiscal year, though its growth has slowed considerably compared to the bottom line explosions at fellow big tech companies like Microsoft and Nvidia. Some bullish analysts liken Apple’s opportunity to become the go-to consumer option in generative AI to its opportunity in the 2000s to corner the market on portable music players via the iPod and smartphones via the iPhone.
Tangent
Apple is worth more than the 200 smallest companies on the leading S&P 500 stock index combined, according to FactSet data, a testament to just how sensitive the broader market is to any changes in Apple’s valuation.
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