Photo Credit: Maxx Girr from Pixabay

Earlier this month, Apple (Nasdaq: AAPL) announced its second-quarter results that outpaced market expectations. The market was impressed with the $110 billion buyback announcement, and its stock price increased 7% in the after-hours trading session.

Apple’s Financials

Apple’s second-quarter revenues fell 4% to $90.75 billion, ahead of the market’s forecast of $90.4 billion. EPS of $1.53 was ahead of the Street’s forecast of $1.51.

By segment, iPhone revenues fell 10% to $45.96 billion compared with the Street’s forecast of $46 billion. Mac revenues grew 4% to $7.5 billion, significantly ahead of the estimate of $6.86 billion. iPad revenues fell 17% to $5.6 billion and were short of the market’s forecast of $5.91 billion.

Apple finally unveiled its latest iPad earlier this week. Other product revenues fell 10% to $7.9 billion compared with the analyst estimates of $8.1 billion. Services revenues grew 14% to $23.9 billion were higher than the market’s expected $23.27 billion for the quarter.

Apple did not provide an outlook for the third quarter but mentioned that it is now looking at a growth of “low single digits” for the period. The market estimated revenues of $95.32 billion and an EPS of $1.59.

Apple’s AI Measures

With Google and Microsoft upping the ante on AI investments, the market has been watching for Apple’s take on the high-growth technology. Apple’s recently unveiled products include new iPads, the new M4 chip, and several new inclusions of AI capabilities and upgrades to its accessories.

The redesigned 11-inch and 13-inch iPad Air are now powered by Apple’s M2 chip. They will feature AI-enabled Center Stage technology for its camera that uses machine learning to keep everyone within view during FaceTime calls. Some of the new AI capabilities added during the quarter include an Auto Enhance tool in Photomator for easy photo-quality improvement and motion tracking on Onform to improve athletic performances.

The market is waiting for Apple’s June 10^th annual developers conference when it is expected to show off its AI capabilities. Many believe that Apple will release an improved Siri that is more conversational and versatile by including a new generative AI system that will allow it to chat rather than respond to questions. The latest version of Siri is expected to be more private than rival AI services because it will process requests on iPhones rather than remotely in data centers, thus being more cost-effective and more secure.

Apple is concerned that AI has the potential to become the primary OS, thus impacting iOS. Also, the growing number of AI uses is leading to an ecosystem of AI apps, known as agents, that will help users order Ubers or make appointments, thus potentially impacting the revenue from Apple’s App Store.

Apple is looking for the next big bet to take its business forward. It recently called quits on the $10 billion project of building a self-driving car. The VR headset released last quarter is still a pricey bet to help propel growth. Apple doesn’t want Siri to compete directly with ChatGPT to write reports, but it wants to leverage AI to improve things that Siri already does to make its users lives easier.

Apple’s stock is trading at $189.84 with a market capitalization of $2.91 trillion. It touched a 52-week low of $164.08 in mid-April this year and a 52-week high of $199.62 in December.

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