Apple reported strong fiscal first-quarter results, exceeding revenue and earnings expectations. With revenue hitting $90.75 billion and earnings per share rising to $1.53, the company’s dominant hardware and growing services businesses have established a competitive moat. The company’s commitment to customer experience has resulted in industry-leading user loyalty scores, giving it pricing power. This is why Apple is one of the two “own it, don’t trade it” stocks in the portfolio.
Apple’s performance in the quarter included setting records for its installed base of active devices across all geographies and product categories, driving high-margin revenues from its services business. Sales in Greater China came in better than expected, with the iPhone driving an acceleration in the region and holding the top-selling smartphone positions in urban China. The company also achieved new sales records in various regions globally. Additionally, Apple announced a $110 billion share repurchase authorization, the largest corporate buyback of all time, signaling positive catalysts ahead, including CEO Tim Cook’s anticipation of sharing the company’s artificial intelligence efforts at WWDC in June.
Despite slightly lower-than-expected operating cash flow, Apple’s free cash flow was stronger than expected due to lower capital expenditures, enabling the company to return cash to shareholders through buybacks and dividends. With a net cash position of about $58 billion, the company is focused on maintaining net cash neutrality, returning excess cash to shareholders. Apple’s services segment recorded all-time revenue records, showing growth in both developed and emerging markets, with an increase in paid subscriptions. The company’s June quarter guidance indicates expectations of low-single-digit revenue growth, with a double-digit growth rate in services revenue similar to the first half of the fiscal year.
Apple’s product performance in the quarter included an increase in the installed base of active devices, with the iPhone remaining the top-selling smartphone in various regions. Mac revenue was driven by the M3 MacBook Air, and iPad sales faced difficult comparisons with the launch of previous models. The wearables, home, and accessories segment experienced a decline due to tough comps from the previous year. The company is optimistic about the special computing opportunity in enterprise, with a focus on innovative use cases for its products in various industries.
Overall, Apple’s strong performance in the quarter, along with positive catalysts ahead, such as AI initiatives and new product developments, support the company’s continued growth prospects. The share repurchase authorization and dividend increase demonstrate management’s commitment to capital allocation strategies that benefit shareholders. With a price target increase to $220 and expectations of positive momentum, Apple stock is poised for potential future gains.
