Apple shares rise more than 5% premarket after Q2 results top downbeat estimates

Investing.com -- Shares in Apple rose by more than 5% in premarket U.S. trading after the tech giant reported fiscal second-quarter results that topped Wall Street estimates thanks in part to better-than-anticipated performance at its key China market.

For the quarter ended Mar. 30, the company announced earnings of $1.53 per share on revenue of $90.8 billion. Analysts polled by Investing.com had anticipated EPS of $1.5 on revenue of $90.32B.

In greater China, a central focus for investors in recent months, sales fell 8% to $16.37B, amid rising competition from smartphone rivals in the country. But that was not as bad as analysts' forecasts of $15.25B.

Revenue from Apple’s service business, which includes Apple Music, Apple TV+ and iCloud, grew to $23.87B from $20.91B a year earlier, above projections of $23.27B.

Wearables and accessories raked in $7.91B in quarterly revenue, down from $8.76B, while iPad revenue fell 16.7%. Mac sales were up 3.9% from a year earlier.

The company also announced a $110B stock repurchase program and hiked its dividend by 4% to $0.25 a share. The largest-ever buyback could bolster investor support and trust that will be needed in the mid-term for the company to launch new products and solutions that "will shift its behemoth operation back into the sustained growth path," Investing.com senior analyst Thomas Monteiro said. 

Apple shares (NASDAQ:AAPL) have dropped by over 6% so far this year. During the decline, Apple has lost its position as the world's most valuable listed company to Microsoft (NASDAQ:MSFT).

Analysts have suggested that new potential offerings fueled by generative artificial intelligence -- which may be announced at Apple's much-anticipated developers' conference in June -- could help reverse this trend. Apple recently launched its Vision Pro headset, and is reportedly set to unveil a fresh version of its iPad tablet in May. 

In a call with analysts, Apple Chief Executive Tim Cook specifically backed the firm's plans for generative AI, saying the nascent technology could help lift hardware demand. Sales of its flagship iPhone handset device, which makes up about half of total revenue, dipped to $45.96B from $51.33B a year earlier, missing estimates of $46B.

Looking ahead, Apple predicted that sales would grow in the low single digits in the June quarter, an outlook that analysts said pointed to three-month revenue of roughly $83.5B. Such a mark would be "better than feared," analysts at Morgan Stanley said in a note to clients. 

"While the June quarter guide historically does little to change the Apple narrative, this year is different because tonight's [...] guidance appears to signal that Apple has finally passed the trough of the negative estimate revision cycle," the Morgan Stanley analysts said.

"Apple executives projected a positive tone, repeatedly highlighting its AI opportunity and exciting forthcoming announcements," analysts at Bernstein said in a note.

Yasin Ebrahim contributed to this report.