Amid rising competition in China and concerns that Apple has been slow to the artificial intelligence trend, revenue attributed to the iPhone for the most recent quarter came in slightly above analysts’ expectations at $45.96B out of a total $90.75B. Revenue from Greater China fell 8.1% year-over-year during the period to come in at $16.37B, which Seeking Alpha analyst Christopher Robb said were “less than feared.”
Looking ahead, Apple Chief Executive Tim Cook said overall revenue for the upcoming quarter is likely to grow in the “low single digits,” prompting many on Wall Street to suggest the worst is behind the iPhone malaise.
“The star of the show was June guidance calling for low single digit growth vs. the Street’s whisper numbers looking for a decline as it appears iPhone demand is now starting to slowly turn the corner in China along with a robust Services performance which remains the bedrock of growth for Cupertino,” Wedbush Securities analyst Dan Ives wrote in an investor note.
“This is the drumroll moment as Apple is set to unveil its long awaited AI strategy to its golden installed base and developer community at WWDC in June which begins an AI driven supercycle starting with iPhone 16 this Fall,” Ives added. Ives has an Outperform rating and $250 price target on Apple.
Shares rose more than 6% in premarket trading.
Apple is slated to unveil new products next week — widely expected to be iPads — with some speculating that the new tablets could be the start of Apple’s AI marketing and technological blitz and feature Apple’s latest processors, likely to be known as the M4 series.
The following month, Apple will hold its annual developer conference, which Cook said has generated “enormous enthusiasm from our developers.” The event has also captured the imagination of Wall Street, as many are expecting announcements surrounding generative AI.
“We expect Gen AI related features for iOS18 at WWDC in June and then at the iPhone event in [September],” Bank of America analyst Wamsi Mohan wrote in an investor note. “We expect Apple to continue investment in its own Silicon (with HBM over time) and focus on integrating hardware, software and services to fully monetize the Gen AI opportunity.” Mohan has a Buy rating on Apple and raised his price target to $230.
Citi analyst Atif Malik went further and opened a positive catalyst watch on Apple going into WWDC, noting that Cook “sounded bullish” on the prospects of AI during the earnings call. Malik, who has a Buy rating and $210 price target on Apple, said he is expecting multiple AI developer tools to enhance interactivity and productivity.
Others also expressed hope about the coming events, including JPMorgan analyst Samik Chatterjee, who said that the company now has a “a better-than-feared launch pad into the AI upgrade cycle.” Chatterjee has an Overweight rating on Apple and raised his price target to $225 from $210.
In addition to the AI-related hope, many on Wall Street were surprised at the size of the buyback announcement — $110B — believed to be the largest ever such unveiling.
Seeking Alpha Investing Group Leader Lillian Cheung of Livy Investment Research expressed pessimism around the company’s most recent quarterly results, but added Apple’s “robust cash flows” should “continue to support its generous capital returns program through share buybacks, which is key to buoying confidence in the stock.”
In addition to the increased buyback, Apple raised its quarterly dividend to $0.25 per share, an increase of 4%.
