Apple 1H Earnings: Moving Forward No Matter What

The three tech giants Apple (AAPL), Microsoft (MSFT) and Google (GOOG) released their quarterly results after the market close yesterday. All three companies performed excellently, posting double-digit growth rates and exceeding expectations. However, their shares showed a very ambiguous dynamic.

In the usual time after such results, one should expect a strong price growth momentum, but this did not happen this time around. It looks like fears about the future economic growth, which sneaked into the market earlier in July, are beginning to affect the tech sector as well. The 2020 low base effect will fade in the near future and, for example, Alphabet-Google's (GOOG, GOOGL) revenue growth rate in the next quarter should slow from 62% to as low as 8% YoY. For Apple, a similar slowdown is expected in the 4th quarter, when the growth rate may fall down to 6%.

Given the current level of valuation in the sector and the impending slowdown in the growth rate of financial indicators, we, at best, expect to see neutral share performances of large technology companies going forward. At the same time, from our point of view, the probability of a correction within 10-20% of the current levels is now high.

Among the Big Three, Apple Inc (AAPL) reported record revenue for the prior quarter of $81.4 billion, up 36% from a year earlier, and quarterly earnings per diluted share of $1.30. Product sales reached $63.948 billion, and services brought $17.486 billion.

Operating profit for the quarter amounted to $24.126 billion (almost doubled YoY). Net profit for the year increased from $ 11.253 to $ 21.744 billion. During the reporting period, iPhones were sold for $39.570 billion, Macs for $8.235 billion, iPads for $7.368 billion, wearables, home electronics and accessories for $8.775 billion.

Operating cash flow was reported at $21 billion ($34.050 billion in cash and cash equivalents). The company returned to shareholders during the quarter almost $29 billion, despite a large capex program. Also, Apple's BOD announced a dividend of $0.22 per common share.

Conclusion: the company continues to move forward no matter what to produce even more technologically innovative solutions. Apple is also on track to meet its 2030 environmental target. Record financials for the previous quarter include new revenue highs in each geographic sales segment, as well as double-digit growth in each of the company's product categories, and a new all-time high for active devices.