Apple reports earnings and revenue beat, boosted by services business

Apple reported earnings and revenue for its fiscal second quarter that topped analysts' estimates, driven by growth in the company's services business. The stock was little changed in extended trading.

Sales for iPhones missed estimates for the second time in three quarters, the only significant number that came up short of expectations in Thursday's report.

Here's how the company did compared to analyst estimates, according to LSEG consensus.

Wall Street is also looking at these key areas: 

Revenue climbed 17% from $95.4 billion a year earlier, Apple said. The results mark the first time the company is facing Wall Street since the announcement last week that Tim Cook will be stepping down as CEO after 15 years on the job.

Apple said its board authorized an additional $100 billion in stock repurchases and declared a cash dividend of 27 cents per share, up 4%.

In March, Apple announced a number of new products, including its iPhone 17e, a refreshed iPad Air laptop with an M4 chip in 11-inch and 13-inch sizes. The biggest surprise was the MacBook Neo, a low-cost laptop priced at $599 and aimed at students and budget-conscious consumers.

Sales of iPhones rose 22% in the quarter from a year earlier. Like other consumer electronics companies and device makers, Apple faces supply chain constraints, largely due to the global memory shortage that's being driven by soaring artificial intelligence demand. Meta and Microsoft said Wednesday that higher memory prices contributed to their increased capital expenditures forecasts for the year.

While device sales are always key to Apple's results, top of mind for Wall Street is what to expect from incoming CEO John Ternus. Apple announced on April 20, that Ternus is succeeding Cook, who will become executive chairman on Sept. 1.

Ternus, a longtime Apple exec who's been running hardware, joined the call after Cook introduced him.

"We have the right leader ready to step into the role," Cook said in his opening remarks, adding that Apple has the team to realize the "promise of this company."

Ternus thanked Cook and Apple's shareholders and said, the company has an "incredible roadmap ahead."

One of the first things Ternus has to figure out is where Apple is going to go with artificial intelligence. Early in the quarter, Apple announced it would partner with Google to use its Gemini AI model to power its Siri product.

Services revenue in the quarter rose about 16% from $26.65 billion a year ago. Apple uses its massive base of iPhone customers to sell subscriptions to entertainment services, as well as for Apple Pay, iCloud and AppleCare.

Along with growth in services, Apple generates higher profit margins. Long stuck in the high 30s, Apple's gross margin has been steadily moving up in recent years, reaching 49.3% in the latest quarter up from 48.2% in the previous period.

Greater China sales increased during the quarter to $20.5 billion, up 28% from $16 billion a year ago. The China region is Apple's third biggest, behind Americas and Europe.

Research and development costs increased at a much faster pace than revenue, growing 33% in the quarter to $11.42 billion from $8.55 billion a year earlier.

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