Apple Inc (NASDAQ:AAPL, ETR:APC) added around $160 billion (£127.5 billion) in total value in pre-market trades following the publication of the Cupertino megacap’s second-quarter results.
What was the secret ingredient?
Tim Cook’s cash-rich tech conglomerate declared a record-beating, largest-in-US-history share buyback programme that will see one hundred and ten billion dollars given back to shareholders.
Case closed! Well, maybe there’s more to it than that. After all, these results were far from flawless.
iPhone sales slumped more than 10% year on year to $46 billion, highlighting an existential problem for Apple- its flagship device is losing ground in China, largely to resurgent domestic rival Huawei.
Yet, just like an Apple Genius fixing your bricked Macbook, Apple found a saviour in services revenue.
The segment, which comprises App Store, Apple Music, Apple Pay, iCloud, AppleCare and revenue from other services like advertising and licensing, saw a 14% increase in sales to nearly $24 billion.
These combined results beat the Street, Wedbush pointed out, negating “doomsday calls that have caused many investors to hit the exit button on this stock the last few months”.
Apple shares, when ignoring pre-market gains, are down nearly 7% year to date; in other words, they had room to move.
But there’s a bigger story at play here, reckons Wedbush, with the main character’s name beginning with art and ending in artificial intelligence.
The AI supercycle
“This is the drumroll moment as Apple is set to unveil its long-awaited AI strategy to its golden installed base and developer community at (the Worldwide Developers Conference) in June which begins an AI-driven supercycle starting with iPhone 16 this Fall,” predicted analysts.
They continued: “We believe the AI strategy at Apple will consist of an AI App Store that will be the foundational starting point for developers and AI apps over the coming years tapping into the 2.2 billion iOS devices worldwide along with an iPhone 16 model that will break new ground in AI and begin this next supercycle at Apple.”
Apple has fallen behind in the AI arms race while Magnificent 7 counterparts Nvidia, Microsoft and Meta have steered ahead. It’s for this reason that Apple lost its spot as America’s most-valuable company to age-old rival Microsoft earlier this year.
A good showing at the next WWDC and a few AI carrots to dangle in front of investors would be a significant boost to Apple’s status as an industry leader.
AI hype, less-bad-than-anticipated financials and the largest share buyback announcement of all time? No wonder shares soared over 6% in Friday’s pre-market.