Apple returns $200bn in cash to investors as iPhone sales boom
Apple once again beat Wall Street’s forecasts for revenues, earnings and iPhone sales with its results for the second quarter, as it said it would return another $70bn to shareholders.
The world’s most valuable company by market capitalisation posted revenue growth of 27 per cent to $58bn, ahead of analysts’ expectations of around $56bn, thanks to stronger-than-anticipated iPhone sales, up 40 per cent to 61.2m units.
Net profit for quarter ending in March was $13.6bn, boosting earnings per share by 40 per cent to $2.33 — better than the $2.16 forecast by Wall Street analysts.
“We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch,” said Tim Cook, Apple’s chief executive, in a statement.
At the same time as announcing the figures, Apple said that it would expand its dividends and buyback scheme to return a total of $200bn to shareholders by the end of March 2017, up from the $130bn programme of a year ago. That includes a 11 per cent dividend increase and a further $50bn in share repurchases.
However, the iPad remained a weak spot in Apple’s line-up with sales of 12.6m, below expectations.
Apple’s stock traded close to its all-time high above $133 on Monday, before the company reported its results after the market close.
Several factors have been driving the iPhone’s growth. A study by Morgan Stanley in the run-up to Apple’s results found that iPhone customers upgrade their smartphones more frequently than other mobile customers.
The bigger screens offered by the latest iPhones released in September have also driven a fresh wave of upgrades.
The iPhone’s popularity is affecting the rest of the smartphone industry. Chipmaker Qualcomm warned last week that revenues this year would be $1bn less than it had previously thought, in part due to the strength of Apple, which uses its own mobile chips.
However, analysts at Piper Jaffray say some investors are concerned about the prospects for continuing health in iPhone sales between now and the release of its next update, likely in September. “If the iPhone 6/6+ cycle is fundamentally different than prior cycles given the larger screen size, which we believe is true, then market share in June and September could be higher than historical norms,” Piper Jaffray said in a note on Monday morning.
The figures come just days after the first shipments of Apple Watch reached customers who pre-ordered the device two weeks ago. Apple said back in October that it would not disclose financial results for its latest product, instead rolling Watch revenues into a broader category of accessories including the iPod, Beats headphones and other peripherals.
Analysts at Forrester Research predict that 10m Apple Watches will be sold by the end of the calendar year.
Apple has revisited its capital return programme every spring after resuming dividend payments and a huge share buyback scheme in 2012. Since then it has returned more than $112bn to shareholders.
Mr Cook told investors at the Goldman Sachs technology conference in San Francisco in February that Apple would give back any cash that it does not need to invest in the business or make acquisitions, such as last year’s $3bn deal to buy Beats Electronics. “It may come across that we are, but we are not hoarders,” Mr Cook said.
Because more than three quarters of its cash pile is held overseas, Apple has turned to the debt markets to help finance its buybacks.
“Since the current program started two and a half years ago, Apple returned 100 per cent of its free cash flow on a fully taxed basis,” analysts at Morgan Stanley