Apple released its earnings report on Thursday, revealing a drop in overall revenue driven by declining iPhone sales.
However, earnings exceeded market expectations and Apple shares rose in after-hours trading. Tim Cook, Apple’s chief executive, said in a statement issued before the call that “Apple is reporting revenue of $90.8 billion for the March quarter, including an all-time record for services revenue.”
The iPhone maker reported revenue of $90.8 billion, down 4% year over year, but beat forecast earnings of $90.1 billion. It declared $0.25 in cash dividends per share, an increase of 4%. iPhone revenue was $45.96 billion, down 10% from the same period last year, while Wall Street estimates were $46 billion. The company also reported that its board had authorized a $110 billion share buyback.
“Long-term, I think Apple’s shift toward a services business model is a solid approach to offset its dependence on iPhone sales performance,” said Forrester vice president and principal analyst Thomas Husson.
Apple overtook Samsung late last year as the world’s largest smartphone supplier. capturing about 20% of global market share. However, Apple’s smartphone shipments declined in the first quarter of this year, as Chinese competitors such as Huawei gained ground. Samsung, which saw a smaller drop in shipments than Apple, He recovered the first place among smartphone manufacturers in the first months of 2024.
During the question-and-answer portion of the earnings call, Cook and Apple CFO Luca Maestri answered multiple questions about the company’s performance in China. Demand in the country has fallen, although the earnings report showed the situation was less serious than many investors feared.
Cook also said Apple would make “significant investments” in generative AI in the next quarter, in line with similar announcements from Amazon, Alphabet, Microsoft and Meta in recent weeks. He repeatedly mentioned artificial intelligence, stating that the MacBook Air was the “best consumer laptop for AI.”
“We continue to feel very optimistic about our opportunity in generative AI,” Cook said on the call. “We are making significant investments and look forward to sharing some very exciting things with our customers soon.”
As with many large technology companies over the past year, Apple made cuts in several departments and laid off a considerable number of employees. It closed a decade-long project to produce a self-driving electric car in February and laid off about 600 workers last month following the announcement. The development of the car, codenamed Project Titan, is estimated to have cost Apple approximately $10 billion. The company’s electric vehicle operation had a long history of turmoil, but the complete shutdown of the multibillion-dollar effort surprised both the public and Apple employees working on the project.
When the electric vehicle project was canceled, Apple executives also announced that they would dedicate more resources to artificial intelligence projects. Apple has been poaching AI researchers from other tech companies like Google, according to an analysis by the Financial Times, and is quietly setting up an AI research lab in Zurich. Apple has also been releasing AI research articles that can predict new features on their phones.
Apple has been less public about its foray into generative AI than rivals such as Microsoft and Google, but it has similarly invested money in staffing and acquiring AI startups. It is expected to reveal more plans to integrate generative AI into smartphones later this year.
The Vision Pro headphones, Apple’s first new device in a decade, launched in early February. According to its two most recent earnings reports, the product does not contribute significantly to Apple’s revenue.
The company will also face numerous legal battles in the coming months as regulators in the U.S. and Europe levy fines and antitrust lawsuits. The US Department of Justice filed a landmark antitrust lawsuit in March, accusing Apple of engaging in “broad, sustained and unlawful conduct” to establish a smartphone monopoly.
“Apple creates barriers and makes it extremely difficult and expensive for both users and developers to venture outside of Apple’s ecosystem,” Merrick Garland, the attorney general, said in announcing the lawsuit.
European authorities also fined Apple €1.8 billion for EU antitrust violations, alleging that the company blocked competition from other music streaming services through unnecessary restrictions on its app store. Apple rejected the accusations from European and US regulators and vowed to challenge cases against its business practices.
Apple’s stock price has declined in recent months to hover around $170 per share, below its all-time high of around $199 reached last December. apple stock rose in the days before the earnings report after a well-known Bernstein financial analyst upgraded the stock to a prediction that it would beat current market expectations and advised people to buy Apple stock.
Cook ended his portion of the call by touting Apple’s commitment to environmentally friendly operations and putting a positive spin on the company’s upcoming products.
“I couldn’t be more excited about the future ahead, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people’s lives,” Cook said.