For some reason, Apple Inc. (NASDAQ: AAPL) shares rose after it announced its earnings. It is a surprise because the figures could not have been worse. Maybe the increase was because of a $110 billion share buyback, but that does not change the fundamentals of its business. Maybe it was the tepid forecast, but that only means Apple is no longer a growth stock.
The shares may have rallied by about 8% on the news, but investor skepticism remains. The stock’s year-to-date performance, down about 4%, starkly contrasts with the S&P 500’s 6% gain. The disparity becomes even more pronounced when considering the one-year period, with the S&P up 20% and Apple only about 8% higher. This is a significant departure from the stock’s usual double-digit annual growth.
Revenue took a significant hit, down 4% from the year-ago quarter to $90.8 billion, and earnings remained flat at $1.53 per share. A closer look reveals that, despite CEO Tim Cook’s optimism on the conference call, these key numbers were undeniably alarming. (See how much money Apple makes every minute.)
Apple’s survival hinges on strong iPhone sales. They are the lifeblood of the business. Revenue from the iPhone plummeted from $51.3 billion to $46.0 billion. This means that the success, or lack thereof, of the iPhone 16, set to be introduced in September, is crucial. If its new features fail to captivate customers, Apple’s predicament will worsen.
Cook said China’s results were not as bad as expected. In the world’s largest smartphone and consumer electronics market, Apple has to do better than that. Greater China revenue fell from $17.8 billion in the year-ago quarter to $16.4 billion. The company has a great deal of competition from large China-based phone companies, and global nemesis Samsung.
Make no mistake about it. This was Apple’s worst quarter since the start of the COVID-19 pandemic. At least then, it had an excuse.
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