Apple beats profit expectations as it plans $100bn share buyback

Apple beat revenue and profit expectations in its March quarter as it sold 52.2 million iPhones, barely below Wall Street targets and showing some resilience as global demand for smartphones wanes.

The company also predicted a revenue range of $51.5 billion (€43bn) to $53.5 billion for the June quarter, with a midpoint ahead of the $51.6 billion Wall Street expected.

Apple also boosted its capital return programme by $100 billion, with repurchases from the increase set to begin in the June quarter, and said it bought $23.5 billion of stock back in the March quarter, a sign that it is bringing back most of its hundreds of billions of dollars in cash to the United States. The share repurchases in the march quarter drove Apple's cash net of debt down slightly to $145 billion. "We are returning the cash to investors as we have promised," chief financial officer Luca Maestri said in an interview.

Apple has been at a challenging crossroads this year with sales of its flagship iPhone X disappointing many observers.

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Investors have watched Apple closely in recent weeks as a string of poor forecasts from the smartphone supply chain signalled that iPhone demand may be lower than previously expected. They have also been watching carefully for signs of what Apple plans to do with its hundreds of billions of dollars in cash.

Apple posted revenue for its March quarter of $61.1 billion, up from $52.9 billion last year. The company sold 52.2 million iPhones versus expectations of 52.3 million, up from 50.7 million last year.

Inventory

Average selling prices for iPhones were $728, compared with Wall Street expectations of $742. Mr Maestri said that clearing channel inventory of 1.8 million iPhones – most of them iPhone X and iPhone 8 models – accounted for some of the difference.

Profits were $2.73 per share versus expectations of $2.68 per share, and up from $2.10 a year ago. The company forecasted a midpoint of $52.5 billion in revenue for the June quarter, beating analyst expectations of $51.6 billion.

Apple’s services business, which includes Apple Music, the App Store and iCloud, posted $9.1 billion in revenue compared with expectations of $8.3 billion. Heading into earnings, investors were hopeful that growth in that segment could help offset the cooling global smartphone market.

Apple traditionally updates its share buy-back and dividend programme each spring, and the $100 billion it added this year compares with an increase of $50 billion last year. The company also increased its quarterly dividend 16 per cent, compared with a 10.5 per cent increase last year.

In February, Apple said it planned to draw down its excess cash, though chief executive Tim Cook had downplayed the possibility of a special dividend. But investors have had concerns around Apple because of a brewing trade tensions with China.

Trade matters

While there has not yet been a tariff on devices such as Apple's iPhone, Mr Cook last week travelled to Washington to meet with US president Donald Trump at the White House to discuss trade matters. "We believe tariffs at the end of the day are a tax on the consumer," Mr Maestri said.

Apple has been emphasising its contributions to the US economy in recent months, outlining a $30 billion US spending plan and highlighting the tens of billions of dollars it spends each year with US-based suppliers.

In recent months Apple has been emphasising the size of its overall user base, which includes used iPhones, rather than focusing strictly on new device sales, a sign of the increasing importance of making money off users without selling them new hardware.

Apple shares have dropped 0.1 per cent this year and closed at $169.10 on Tuesday, down 1.8 per cent from their price of $172.26 at the start of the year. Their performance lags the NASDAQ Composite Index, which was up 3.3 per cent for the year.

Messaging service

Meanwhile, results for Snap Inc showed user and revenue growth for its Snapchat messaging service fell short of analysts' expectations for the first quarter after a widely panned redesign of its app, sending its shares tumbling more than 10 per cent.

The app’s number of daily active users, crucial for generating advertising revenue, rose to 191 million in the quarter ended March 31st, but fell short of consensus expectations of 194.15 million. The figure was up 15 per cent from a year earlier, compared to growth of 18 per cent in the previous quarter.

Shares of Snap plunged 10.5 per cent to $12.65 in after-hours trading.

Snap said average revenue per user rose 34 per cent from a year earlier to $1.21, while analysts were expecting $1.25.

Total revenue rose 54.1 per cent from the same period a year earlier to reach $230.7 million in what was Snap’s fifth quarterly earnings as a public company. Analysts on average had expected revenue of $244.5 million. The California-based firm posted a net loss of $385.8 million, compared with $2.21 billion a year earlier.

User growth at the company’s disappearing-message app has repeatedly fallen short of Wall Street’s expectations since its heavily-hyped IPO in March last year. – Reuters