Apple (NASDAQ:AAPL) stock climbed after earnings on Thursday (30 April). Don’t speak too soon, but its artificial intelligence (AI) strategy looks like it’s working.
The company increased its dividend to $0.27 a share. Realistically, though, nobody cares about that – there’s a lot more to take a look at.
Record revenues
Apple posted $111.2bn in revenues – 17% higher than last year. And earnings per share increased 22% to $2.01.
That’s a good result. In terms of sales, it matches the figures Amazon (17%) and Microsoft (15%) posted earlier this week.
It’s also strong by Apple’s own standards. Over the last 10 years, 17% revenue growth has generally been hard to come by.
Source: Fiscal.ai
The $111.2bn revenue figure represents a record for the March quarter. But that shouldn’t be a huge surprise.
The stock is trading at a price-to-earnings (P/E) ratio of 34. At that level, shareholders should probably be expecting earnings to go higher.
It was clearly a very good final quarter for outgoing CEO Tim Cook. But the really interesting stuff is behind the headlines.
Strong results
Apple’s revenue growth was roughly in line with Amazon and Microsoft. But there’s a big difference that investors should pay attention to.
Unlike its cloud computing rivals, the iPhone company hasn’t been spending heavily on data centres. In fact, it’s been strategically avoiding this.
It’s one thing to generate strong revenue growth by investing heavily – and there’s nothing wrong with that. But it’s another to do it without this.
Apple’s strategy is to avoid this expensive-looking rush for Nvidia GPUs. Instead, it’s focusing on developing its own server chips.
Investors should note, though, that R&D expenses are growing faster than any other category. So it’s not as if the firm is standing still.
Apple has also moved away from returning all excess cash to shareholders. There’s a $100bn share buyback on the way, but rising costs are worth keeping an eye on.
What’s the risk?
Apple’s AI plan is to integrate whichever products ultimately become successful. And there’s an obvious advantage to this strategy.
It avoids literally hundreds of billions in spending, which is great. But it does come with some risks.
It means the company simply has to have a compelling hardware proposition at the right time. And that means the iPhone.
Apple’s latest report is very impressive in terms of products. But the firm is only ever as good as its last generation of devices.
That’s the thing investors need to keep an eye on going forward. Especially with the iPhone 18, which is expected in September.
It means shareholders can’t be complacent about the leadership transition. But I do think the company is in a very good place at the moment.
Buying…
I’m getting buying vibes from Apple. But it’s not the stock that I’ve got my eye on.
The firm is doing well, but that’s reflected in the share price at the moment. So I’m looking at other ways to invest around the theme of AI right now.
I do, however, like the look of the MacBook Neo. That’s something I’ve got my eye on seriously for later this year…
