Forget AI. Apple's plan to restore confidence is a $110 billion stock buyback.

By Therese Poletti

With its shares down over 10% this year, and iPhone sales down as well, Apple Inc.'s big plan to restore investor confidence is a $110 billion stock buyback and a 4% dividend increase.

That larger-than-expected capital return program did assuage investors, as did Apple's (AAPL) iPhone sales, which were not as bad as feared. Apple's shares jumped 6% in after-hours trading on Thursday after the news.

Apple has lost much of its shine in the past year, as investors have gotten nervous about its perceived lack of innovation, especially in the iPhone. Some also believe the company is falling behind in artificial intelligence.

Also read: Apple is set to throw billions more at investors as stock slumps.

Wall Street had been nervous about lower iPhone sales, especially in China. But iPhone sales, while down 10% overall to $45.9 billion, were not down as much as expected in China. Even so, analysts kept coming back to greater China sales on the call with Apple executives, since Apple is seeing increased competition in that massive market now.

"I think it has been - and is through last quarter - the most competitive market in the world," Chief Executive Tim Cook said, adding that he remained "very optimistic" about Apple's business there. Sales in mainland China, he said, were up, while overall greater China sales fell 8% to $16.4 billion, compared with Wall Street's projections of $15.3 billion.

Apple's plan to potentially buy back as much as $110 billion of its stock is its largest repurchase ever, and much bigger than what Wall Street had been expecting. The size of that massive buyback is the market cap of several notable companies, including Boeing Co. (BA )and Deere & Co. (DE).

Executives were also asked a few times about AI and capital-spending plans, and if they would be altered by their plans in AI. An Evercore ISI analyst wrote recently that investors are "struggling to understand" Apple's strategy in AI, relative to its more vocal peers. Another analyst on the call mentioned AI as one of several "overhangs" on the stock for investors, in addition to antitrust lawsuits.

Yet Apple executives remained mum on the company's AI plans. Cook said he did not want to upstage Apple's upcoming Worldwide Developer Conference in June, where it has been rumored that the company will showcase some sort of generative-AI app for the iPhone, among other developments.

Investors who are waiting for innovation will have to wait and see in June what they think of Apple's contributions to the AI frenzy. Other investors who are interested in Apple's stock for its dividends and buyback were clearly happy today, as the company is giving a signal of confidence in itself. Whether that confidence in Apple's future is shared by all investors is still debatable at this point.

-Therese Poletti

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05-04-24 0959ET

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