Given the challenging environment, which includes economic uncertainty, high inflation, and rising interest rates, it isn't a stretch to say people are finding ways to spend less. A recent survey of more than 9,000 consumers found that 69% of respondents planned to cut back on nonessential spending, with 15% planning to eliminate nonessential spending altogether, according to a study by PwC. 

Investors have been concerned about the potential implications for Apple (AAPL 0.47%). After all, the company's high-end goods are considered by many to be a luxury, as the average price of an iPhone reached $988 last quarter, according to research firm CIRP. 

Yet Apple's results yesterday showed the enduring demand for the iPhone, which helped backstop the company's performance amid challenging conditions.

The iPhone 14 Pro and the iPhone 14 Pro Max stacked to show the size difference.

Image source: Apple.

Demand is strong despite headwinds

For its fiscal second quarter (ended April 1), Apple generated revenue of $94.8 billion and while that was down 3% year over year, it was well ahead of analysts' consensus estimates of $92.9 billion. The key driver of the strong topline performance was iPhone revenue of $51.3 billion -- a record for the March quarter. 

Apple's flagship device generated revenue that was well ahead of expectations, as Wall Street had forecast iPhone sales of $48.7 billion. The iPhone continues to be the backbone of Apple's business, accounting for 54% of total sales during the quarter.

Perhaps as importantly, strong pricing power helped Apple deliver robust profits as well, with earnings per share (EPS) of $1.52 unchanged compared to the prior-year quarter, even as revenue edged lower. This was also markedly better than the $1.43 market watchers expected. 

Another headliner was services, a recurring revenue stream that Apple has been curating for the past several years -- fueled by the growing number of iPhones currently in use. Services revenue of $20.9 billion hit an all-time record, accounting for 22% of sales, also demonstrating resilience in the face of headwinds.

Demand for the Mac didn't hold up as well, with sales of $7.2 billion falling 31%. The appetite for the iPad was similarly strained, with sales of $6.7 billion down about 13%.

In typical Apple fashion, and without providing any specifics, CEO Tim Cook dropped this nugget: "We are pleased to ... have our installed base of active devices reach an all-time high." While the company was mum as to the number of devices, we know it's higher than the 2 billion active devices it announced just last quarter. Services continued to generate strong growth -- and part of that is a function of the growing number of devices fueling that demand.

Shareholders rejoice

Strong sales and cost discipline give Apple the resources to continue its tradition of shareholder-friendly practices -- which was on full display.

Apple's board of directors declared a cash dividend of $0.24 per share, an increase of 4%. This marks the eleventh consecutive increase since Apple reinstituted its payout back in 2012. The payout began at a split-adjusted rate of roughly $0.095, increasing by an impressive 153% since inception. While the yield appears low at just 0.55%, that's a function of Apple's spectacular growth (more on that in a minute).

The company isn't stopping there. Given Apple's strong operating cash flow of $28.6 billion, the board has also authorized an additional $90 billion stock buyback, which will increase the proportion of profits allocated to each share -- further enriching Apple investors.

Remarkable value

Apple continues to buck the broader market trend, with its stock down just 9% from its peak reached in early 2022. Yet considering its resilience, Apple stock is still a solid value, selling for just 28 times earnings, compared to a price-to-earnings ratio of 24 for the S&P 500.

While that's slightly more expensive, consider this: over the past decade, Apple stock has gained 929%, and generated total gains of 1,110% when factoring in the dividend. Comparing that to the S&P's total return of 207% during the same period, helps illustrate not only that Apple's premium is well-deserved, but also what a compelling buy the stock is at this price.