Apple to buy back $110 billion worth of stock, a US record
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Key notes
- Apple beat Q2 earnings estimates but overall revenue dipped slightly.
- Apple announced a record $110 billion stock buyback program, the largest in U.S. history.
- Apple expects revenue growth to return in the current quarter, but at a slower pace than analysts predicted.
Apple reported its second-quarter financial results on Thursday, exceeding analyst expectations for earnings per share ($1.53 vs. estimated $1.50) but experiencing a slight decline in overall revenue ($90.8 billion, still beating the average analyst estimate of $90.01 billion). The company also announced a record $110 billion stock buyback program, the largest in U.S. history.
A stock buyback program, also known as a share repurchase program, is when a company uses its cash to buy back its own outstanding shares from the stock market. These repurchased shares are typically retired, meaning they are canceled and no longer count toward the total number of shares outstanding.
Despite a 4% year-over-year revenue decline, Apple’s performance surpassed analyst estimates. iPhone sales fell 10.5%, though some of this decrease can be attributed to a surge in sales during the same quarter last year. Excluding that temporary increase, iPhone sales showed a minimal decline.
Apple’s board of directors authorized a 4% increase in the company’s cash dividend and a $110 billion stock repurchase program. CEO Tim Cook anticipates revenue growth to return in the current quarter, with low-single-digit figures expected. This is slightly below analyst predictions of 1.33% growth.
The announcement of the buyback program comes after a period of underperformance for Apple stock, which has fallen 10% year-to-date. The company faces ongoing challenges, including competition in the smartphone market, particularly from Samsung and Huawei in China, and EU regulatory scrutiny surrounding its App Store business.
But some grass is greener as well. Sales in the services segment, which consists of Apple Music and Apple TV, rose to $23.87 billion, exceeding analyst expectations. Mac sales also grew to $7.5 billion, driven by strong demand for the new M3-powered MacBook Air.
The substantial stock buyback program is probably done to provide stability for investors and potentially increase Apple’s stock price. Analysts believe it could offer necessary support during a period of potential internal restructuring within the company.
Research done by LSEG.
