Expenive iPhones Boost Apple Revenues
Expensive iPhones have helped Apple deliver increased revenues as their share value jumps 3% on the news.
Despite sales of iPhones being flat during the last quarter which is the same problem Samsung has faced Apple was able to ship 41.3 million iPhones with an average selling price of US$724. A major contributor was the high price of the iPhone X, which starts at US $999.
Revenues came in at $53.3 billion vs. $52.34 billion, according to Thomson Reuters consensus estimates.
iPhone sales: 41.3 million vs. 41.79 million, according to StreetAccount
EPS grew by 40 percent year over year, and revenue grew by 17 percent year over year.
Apple also touted growth in its other products, marking over 60 percent growth in wearables, which includes the Apple Watch, AirPods and Beats headphones. The company’s total “Other Products” category, which also includes the HomePod, saw a 37 percent year-over-year jump in revenue, totalling $3.74 billion. Analysts had forecast $3.67 billion in revenue for the segment during the third quarter.
Apple’s catch-all category that includes the App Store, Apple Care, Apple Pay, iTunes and cloud services outpaced iPhone revenue growth for several quarters.
Apple posted $9.55 billion in services revenue for the third quarter — a jump of 28 percent from the year-ago quarter, excluding a favourable one-time item. That beats out Wall Street estimates of $9.21 billion and stands as the segment’s highest quarterly revenue to date.
“We feel great about the momentum of our services business, and we’re on target to reach our goal of doubling our fiscal 2016 services revenue by 2020,” Cook said on the company’s earnings call.
The record services revenue is partly the result of a one-time line item totalling $236 million related to lawsuits, the company said. It also saw a boost from increased paid subscribers through the App Store, a 50 percent year-over-year increase in cloud revenue, and higher Apple Pay usage rates.
“Apple Pay continues to expand with well over 1 billion transactions last quarter, triple the amount from just a year ago, with growth accelerating from the March quarter,” Cook said on the earnings call. “To put that tremendous growth into perspective, this past quarter, we completed more total transactions than great companies like Square and more mobile transactions than PayPal.”
Forward-looking guidance: Apple guided toward fourth-quarter revenue between $60 billion and $62 billion, edging out Wall Street predictions of $59.47 billion, according to StreetAccount.
The company’s most recent quarterly reports have been weighed down by speculation of smartphone market saturation and the end of the so-called “supercycle.” So as Apple looks ahead to its fiscal fourth quarter, when it traditionally introduces new iPhone models, the company’s guidance could shed light on Apple’s ongoing handset ambitions. Apple typically launches new iPhone models at the end of the quarter, in mid-September.
China: Apple has so far avoided the fallout of an ongoing trade war with China. But with each country ratcheting up tariffs, Apple’s deep roots in China could start to feel the effects. Much of Apple’s supply chain is in China, and the mainland country accounts for the company’s second-largest source of revenue, according to FactSet, behind only the U.S.
The company attributed $9.55 billion in third-quarter revenue to Greater China — an increase of 19 percent year over year, but a dip of 29 percent quarter over quarter.
Cook said on the company’s earnings call that none of the imposed tariffs have affected Apple products, but that the company is “evaluating” the most recently announced tariff proposal which would encompass $200 billion worth of Chinese goods.
“Of course, the risk associated with more of a macroeconomic issue, such as an economic slowdown in one or more countries, or currency fluctuations that are related to tariffs is very difficult to quantify and so we’re not even trying to quantify that to be clear about it,” Cook said.