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Apple Plans $110 Billion Share Buyback

Last Thursday, May 2, Apple released information about its financial results for the first quarter of 2024 and announced a record share buyback.

Apple Plans $110 Billion Share Buyback

The revenue of the mentioned technology giant, which is based in Cupertino, California, for January-March of the current year, was fixed at $90.8 billion. This figure is 4% lower than the result for the same period in 2023. LSEG experts predicted that the technology giant’s revenue for the first quarter of 2024 amounted to $90.01 billion.

It is worth noting that the company is currently facing what can be described as growth problems. The most difficult situation in the context of Apple’s performance and prospects is currently observed in China, where the brand’s sales volumes are on a steady downward trajectory. Moreover, a significant factor in the negative impact on the company’s business is the economic uncertainty that exists in a large-scale format at the global level.

Also on Thursday, the technology giant announced the largest share buyback in its history worth $110 billion. Last year, this figure was $90 billion. The company’s management made the corresponding decision against the background of a 10% drop in iPhone sales in the first quarter of 2024 year-on-year. The mentioned result is evidence that demand for the latest generation of the device has turned out to be weak. In this case, it means the iPhone 15, which debuted in September last year.

The decline in smartphone sales for Apple can be a serious problem since this particular line of business generates about half of the company’s total revenue. If the current tendency does not change, there is a possibility that iPhone sales will transform into a kind of long-term financial downturn process. But this is one of the possible scenarios and not a guaranteed future option for Apple.

In monetary terms, the technology giant’s smartphone sales in January- March 2024 amounted to $45.96 billion. At the same time, LSEG experts expected that the corresponding figure would be fixed at $46 billion.

The technology giant’s net income for January- March 2024 amounted to $23.63 billion. This indicator fell by 2% compared to the result for the same period last year.

The company’s revenue from the sale of Mac line products for January- March 2024 was fixed at $7.45 billion. This indicator showed an increase of 4% compared to the result for the same period last year.

The technology giant’s revenue from services for the first quarter of 2024 amounted to $23.86 billion. This indicator increased by 14.2% compared to the result for the same period last year.

The company’s revenue from sales of iPad line products for the quarter ended March 31 amounted to $5.55 billion. In this direction of business, the technology giant faced a significant deterioration in the result. The mentioned revenue showed a year-on-year decline of 17%. It is worth noting that the relevant information was released a few days before the press conference, during which the company is expected to present updates for the iPad product lineup and related accessories.

During a telephone conversation with analysts, Apple CFO Luca Maestri said an expectation that in the second quarter of 2024, the sale of the mentioned devices would show double-digit growth compared to the result for the same period in 2023. This forecast may be largely based on the iPad upgrade factor.

The technology giant’s revenue from sales of wearables, home, and accessories for the first quarter of 2024 amounted to $7.91 billion. For the same period last year, the corresponding figure was fixed at $8.75 billion. It is worth mentioning that the specified product line includes AirPods, Apple Watch, and Vision Pro.

The Apple Vision Pro is a mixed-reality headset, sales of which was launched in February 2024. The cost of this device, which is the first fundamentally new product of the technology giant after a long break, is $3,499. The media reports that the company has spent billions of dollars on research and development within the framework of the project, the material result of which was Vision Pro. The debut of the mixed reality headset did not become a catalyst for sales growth in the company’s wearable device category, as evidenced by data for the first quarter of the current year. At the same time, it should be noted that sales of the device were not launched at the very beginning of the three-month period that ended on March 31.

Apple analyst Ming-Chi Kuo has released a forecast for the manufacturing of a mixed-reality headset, according to which making the corresponding products will cut several hundred thousand units.

Company’s CEO Tim Cook stated that approximately 50% of Fortune 100 firms have purchased Vision Pro. According to him, this device allows users to explore things that are not yet possible. Such a statement has a significant share of a kind of marketing component, which still does not negate the fact that Apple has made a significant step in the sector of manufacturing products, with which consumers can immerse themselves in the virtual reality space and become an active character in the digital dimension of being. This is a promising area of activity that many technology giants are paying attention to. For example, Meta, in the context of relevant efforts, has very bold ambitions, which consist of striving to form a large-scale digital space, which is what can be described as a virtual universe, although it has a kind of corporate origin. The new dimension of reality has already become an objective fact, the denial of which does not have any convincing arguments. In this case, it means a digital segment of life that has a significant impact on the processes taking place in the plane of the being, the continuous materialization of which is carried out offline.

Google in April opened up access to its virtual reality operating system to all headset manufacturers, embracing the approach used by Windows and Android. For Apple, this means increased competition. The struggle for leadership in the virtual reality area will likely increase, as the relevant sector of the technology industry demonstrates the tendency of expansion and intensive development.

Tim Cook has already announced the imminent integration of artificial intelligence into the company’s products but did not specify the relevant intentions. It is worth noting that Apple is currently lagging behind competitors in the context of activities related to the development and implementation of AI. Tim Cook says that the company considers generative artificial intelligence as the main opportunity for its products and is convinced of the advantages that are a distinctive feature within the framework of the brand competitiveness indicator. Apple is expected to present the tools based on AI at the Worldwide Developers Conference, which will be held in June. The media also reported that the company is in talks with OpenAI to develop a chatbot for the iPhone. Moreover, Tim Cook is expected to present the company’s strategy in the artificial intelligence industry in June.

After the information on the financial results of the technology giant’s activities for the first quarter of 2024 was released, the price of its shares showed an increase of more than 7% in after-hours trading. Since the beginning of this year, the company’s securities have fallen in price by more than 8%. It is worth noting that on Friday, May 3, Apple’s share price rose by 6% in the premarket trading.

Currently, one share of the tech giant is worth less than $170. It is worth noting that in different periods of 2023, the corresponding figure almost reached the $200 mark. The company has repeatedly overcome various barriers and adverse circumstances of reality on the way to a market capitalization of $2.6 trillion. The technology giant, going through not the simplest period in its history, continues to be one of the largest companies in the world.

There is no guarantee that investors will be able to continue to expect an increase in the volume of buyback shares from Apple. The company announced attempts to draw down its huge cash pile, which at the end of the first quarter of 2024 amounted to $162 billion.

S&P Dow Jones Indices data show that as of the end of 2023, Apple has spent $658 billion on stock buybacks over the past 10 years.

Luca Maestri says that the company’s free cash flow has been very high for many years, having demonstrated particular growth in the last few years. The corresponding statement was made as part of commenting on the financial results of the technology giant for the first quarter of 2024.

Steve Sosnick, chief strategist at Interactive Brokers LLC, commenting on Apple’s buyback shares intentions, said that the appropriate decision may mean that the technology giant is approaching becoming a valuable stock that returns money to shareholders, rather than an asset in need of cash for research, development and expansion.

Wall Street did not focus on the negative aspects of the company’s performance in January-March of the current year. This means that the sentiment was focused on the positive or the search for it. Wall Street has been changing its perception of the technology giant for years. Initially, the company was within the status of a gadget manufacturer, but over time it transformed into a structure with significant financial indicators. Apple’s business has not changed dramatically in terms of its content during this time. In this case, a change in status is meant solely in the context of brand perception.

Returning to the problems of Apple’s prospects, which have become particularly acute in the Chinese market, it should be noted that in the Asian country, the company found itself in a kind of high-pressure zone, which is the result of the cumulative effect of the combined impact of several factors, including increased competition from local manufacturers and slowing economic growth, that provoking increasing uncertainty and the desire to save money among consumers. At the same time, there is another very significant problem that the technology giant is facing. Chinese authorities have banned employees of government-backed companies and state agencies from using Apple devices in the workplace. This prohibition is to some extent semi-secret, but its consequences are already very obvious. The tendency to abandon Apple products in China is currently showing signs of scaling up. More and more locals are opting for Huawei and Xiaomi devices. Tim Cook, at the same time, expressed a positive attitude towards China. The CEO of the company also noted that in the context of assessing the prospects for doing business in an Asian country, he focuses on long-term prospects, and not on situational results of the near future.

Apple’s net sales in Greater China for the first quarter of 2024 amounted to $16.37 billion. Over the same period last year, the corresponding figure reached $17.81 billion. As for the geographical segmentation of the company’s sales, in this case, the main market is the Americas. In this region, which includes North and South America, the technology giant’s net sales in the first quarter of 2024 amounted to $37.27 billion. A year earlier, the corresponding figure was fixed at $37.78 billion. The technology giant’s net sales in Europe in January-March 2024 amounted to $24.12 billion. In the first quarter of 2023, this figure was fixed at $23.94 billion.

Tim Cook said on Thursday that the company has set revenue records in some countries. In this context, he mentioned Canada, Turkey, Spain, and the countries of the Middle East.

Apple predicts that overall revenue growth will be negligible in the second quarter of 2024. This is a kind of cautious hope of improvement after the negative, but not catastrophic, or critical result for January-March of the current year. LSEG analysts predicted that Apple’s total revenue growth for the second quarter of 2024 would be 1.3%.

Research company IDC has released information that in January-March of the current year, shipments of Apple smartphones worldwide fell by 10%. These data fully coincide with the official information. Nabila Popal, director of research at the mentioned firm, said that this is a sharp drop, but at the same time noted that over the past four years, the technology giant has demonstrated resilience, overcoming difficulties associated with disruptions in supply chains and caused by macroeconomic problems. In this context, Apple’s significant result in resisting external challenges was separately highlighted in comparison with the effectiveness of other brands in a similar direction of a kind of struggle for a successful business.

This year, Apple reported that it has 2.2 billion active devices. This indicator is evidence of the large-scale coverage of the customer base. Also, the current number of active devices forms significant prospects for the company’s business in the subscription services segment.

For investors, the technology giant’s financial results for the first quarter of 2024 were a relief of sorts. The company once again recorded a downturn, but the corresponding figures turned out to be better than preliminary forecasts. In February, the technology giant warned analysts that its revenue for the first quarter of 2024 would fall by about 5% year-on-year. As a result, this indicator decreased by 4%.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.