The iPhone is back.
Apple Inc on Tuesday reported sales and profits for the holiday shopping quarter above Wall Street expectations, powered by a rise in iPhone sales for the first time in a year and soaring demand for add-ons like AirPods wireless headphones.
The strong performance outweighed concern about the coronavirus in China, a major market as well as manufacturing hub for Apple, and a slight revenue miss in the company’s closely watched services business, which includes the new Apple TV+ streaming offering.
Photo: AP
Shares of Apple rose 2 percent in after-hours trade.
Apple gave a revenue forecast for the quarter ending in March above Wall Street expectations.
Chief executive Tim Cook told Reuters that the company was using a wider-than-normal prediction range because of the uncertainty created by the coronavirus outbreak in China.
Cook told CNBC that Apple has shut one store in China and is restricting employee travel due to the virus.
“Apple also is forecasting a stronger Q2 than analysts predicted, but the fact that the coronavirus is spreading in unpredictable ways in China, where Apple has most of its hardware built, could upset this optimistic forecast,” eMarketer principal analyst Yoram Wurmser said.
The number of active iPhones, computers and other devices owned by customers, called the installed base, grew by 100 million to more than 1.5 billion over the past year, and Apple executives set a new target of 600 million paid subscribers for music, TV, gaming and other services by the end of this calendar year.
Apple’s share price has more than doubled since Cook said a year ago that the company was likely to miss financial targets for its biggest sales quarter of its fiscal 2019.
In the year since, Apple slashed prices in China, one of its most important markets, to rekindle sales there.
The company also made a push into paid services, rolling out a credit card with Goldman Sachs,and subscription gaming and television services last year.
“Services are important, but the trajectory is heading on target. I feel they’ve made good progress on that front,” said Hal Eddins, chief economist for Apple shareholder Capital Investment Counsel. “It’s easier to take a small miss like that in context when they also lift the Q2 revenue figures higher.”
Apple posted US$91.8 billion in revenue for the quarter that ended on Dec. 28 last year, compared with analyst estimates of US$88.5 billion, IBES data from Refinitiv showed.
The company forecast US$63 billion to US$67 billion in revenue for the quarter ending in March, ahead of estimates of US$62.4 billion, showing it believes that its phones and other devices such as AirPods wireless headphones will continue to sell well during what is often a slow time of year.
Apple reported services revenue of US$12.7 billion, below analyst estimates of US$13 billion, and up from US$10.9 billion the year before.
Many investors think that services revenue eventually will boost Apple’s gross margins, which were 38.35 percent in the December quarter compared with estimates of 38.06 percent.
However, the shift toward services depends on Apple continuing to grow its base of users and sign them up for recurring subscriptions that analysts view as potentially more lucrative than hardware sales, which can be inconsistent because they are large purchases that consumers make only every few years.
Apple said it now has more than 1.5 billion active installed devices and 480 million subscribers to both its own and third-party paid services, compared with 1.4 billion devices and 360 million subscribers a year earlier.
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