Apple beats street expectations as iPhone, services business save the day

Apple Inc., the world's most valuable company beat subdued Wall Street expectations led by a turnaround in iPhone sales and its high margin services business. Shares rose around 2 percent in after-hours trading.

However, overall sales were down 2.5 percent sequentially, marking a second straight quarterly drop - a first since the pandemic. CEO Tim Cook said that the quarter was better than they expected as the company had warned of sales dropping more than the reported number.

Apple's revenue, Earnings per Share (EPS) and revenue from the products business beat street expectations. Services business revenue, while below estimates, grew 5.5 percent year-on-year.

Apple's iPhone sales grew by 1.5 percent year-on-year, even as the broader smartphone industry saw a decline of 15 percent. The sales increase also put to rest some supply chain issues that hampered production, including an iPhone factory shutdown in late-2022.

“It was quite a good quarter from an iPhone point of view, particularly relative to the market when you look at the market stats,” Cook told CNBC.

iPhone and services were the only two business for Apple that grew year-on-year. Sales of the Mac and iPad were worse than what the company had warned earlier, partially due to shortage of parts. Mac sales were also impacted due to a high base.

Cook also said that overall sales would be higher in constant currency terms, pointing to record quarterly sales in Emerging markets like Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the United Arab Emirates.

Apple’s China regional business, which includes the mainland, Taiwan and Hong Kong, reported $17.81 billion in sales, down from last year’s $18.34 billion. Analysts had hoped that China’s demand for electronics would rise in the quarter as the company exits out of Covid-era lockdowns and other restrictions.

For the current quarter, Apple expects sales to drop by a similar quantum of around 3 percent, provided macroeconomic conditions do not worsen from what they currently are. In case that happens, it would mark a third straight quarterly sales drop for the company.

Apple's board authorised a $90 billion share buyback and also raised its dividend by 4 percent to $0.24 per share.

Cook also rejected the idea of mass layoffs, saying they are a "last resort."

Apple's shares ended 2.3 percent higher in extended trading.