Apple reports blockbuster quarter on robust iPhone sales

PUBLISHED : Wednesday, 01 February, 2017, 6:15am
UPDATED : Wednesday, 01 February, 2017, 11:39am

Apple reported a bigger-than-expected rise in iPhone sales for the holiday quarter, driven by strong demand for the latest version of its flagship smartphone.

Shares of the world’s most valuable listed company were up 2.6 per cent at $124.50 in after-hours trading on Tuesday.

Apple sold 78.29 million iPhones in the first quarter ended December 31, up from 74.78 million last year, marking the first quarterly growth in iPhone sales in a year.

Apple Chief Executive Tim Cook said on a conference call on Tuesday that he expects services revenue to double in the next four years.

“Services obviously continues to be a real success story for them. It’s one of the fastest-growing segments they have, driven largely by the App Store,” said Jackdaw Research analyst Jan Dawson.

Analysts on average had estimated iPhone sales of 77.42 million, according to research firm FactSet StreetAccount.

The results, which reflected the first full quarter of iPhone 7 sales, come at a time when global demand for smartphones is slowing and cheaper Android alternatives are flooding the market.

Revenue in the Greater China region fell 11.6 per cent to US$16.23 billion, highlighting Apple’s struggles in a hotly contested smartphone market.

“We were encouraged by our performance in China because it was clearly an improvement over the last couple of quarters. In mainland China in particular, our revenue was flat and actually grew in constant currency terms,” Chief Financial Officer Luca Maestri said.

The company also forecast revenue of between US$51.5 billion and US$53.5 billion for the current quarter. Analysts, on average, had expected revenue of $53.79 billion, according to Thomson Reuters I/B/E/S.

Maestri said that a stronger US dollar hurt the company’s revenue forecast. Analysts on average expect the company to sell 53.43 million iPhones in the current quarter, according to FactSet.

The company is heavily dependent on the success of iPhones, which account for 40.8 per cent of its total revenue.

Analysts and investors have already set their sights on Apple’s 10th-anniversary iPhone, which is expected to feature better touch screen technology, wireless charging and a shift to OLED display.

Apple’s services business - which includes the App Store, Apple Pay and iCloud - recorded an 18.4 per cent growth in revenue to US$7.17 billion, helped by the popularity of games, including Pokemon Go and Super Mario Run, and increased revenue from subscriptions.

Cowen & Co and Mizuho Securities had expected revenue of about US$7 billion, while FactSet had forecast US$6.91 billion.

Analysts expect growing revenue from Apple’s services segment to help offset declining hardware sales as the smart phone market matures.

The company’s net income fell to US$17.89 billion, or $3.36 per share, in the quarter from US$18.36 billion, or US$3.28 per share a year earlier. Analysts on average had expected US$3.12 per share.

Revenue rose 3.3 per cent to US$78.35 billion in the quarter.

Analysts had expected revenue of US$77.25 billion, according to Thomson Reuters I/B/E/S.

Up to Tuesday’s close, Apple’s shares have gained 14.7 per cent since mid-November, compared with the 5.3 per cent rise in the Dow Jones Industrial Average.