For a while, investors were worried that consumers would be holding out for the next generation iPhone, and as a result, they wouldn’t be spending money at Apple’s stores in the meantime. However, we now know this was not the case.
On Tuesday, August 1, Apple posted fiscal third-quarter earnings that surpassed analysts’ expectations, and revenue that capped estimates, as it sold more iPhones than expected. Regardless of expectations for a “lame duck” quarter, Apple still sold 41 million iPhones during the quarter.
Not only that, Apple hit a massive goal, as the App Store helped to drive the company’s Services division to a record high. To put this into perspective, Apple’s Services division is now the size of a Fortune 100 company.
“If you look at the products, we sold 41 million iPhones but frankly it’s better than that, because we also reduced channel inventories by 3.3 million,” CEO Tim Cook told CNBC on Tuesday. “If you look across the world, we had several markets in Asia, in Latin America, and the Middle East which grew more than 25 percent year-on-year. If you look at the 7 and the the 7 Plus, we grew strong double-digit year-on-year compared to the 6S plus a year ago. So iPhone was terrific.”
After hours, Apple’s shares increased more than 4%, reaching above $157. As of right now, Apple’s record intraday high is $156.65, but if these levels hold until tomorrow morning, the California-based company will open at a record high, with their market cap over $830 billion.
Let’s take a look at how Apple did!
- Adjusted Earnings Per Share: $1.67 per diluted share versus $1.57 per share expected by Thomson Reuters
- Revenue: $45.4 billion versus $44.89 billion expected by Thomson Reuters
- iPhone sales: 41 million versus 40.7 million expected by StreetAccount
This is up compared to adjusted earnings of $1.42 per diluted share on revenues of $42.36 billion in the 2016 period.
Before we move on and discuss one of the most anticipated products of the year, it’s important to mention the following:
- Apple’s cash pile hit a new record of $261.5 billion during the quarter. Additionally, it announced a 63 cents per share dividend.
- Apple reported 11.42 million iPads shipped versus 4.33 million units estimated
- There were 4.29 million Macs shipped versus 4.33 million units estimated
- Tim Cook told investors on a conference call that Apple Watch sales were up 50%
Forget Winter, The iPhone 8 Is Coming:
In regards to the iPhone 8, expectations are higher than ever for the phone to deliver big sales in 2017.
While investors are still out of the loop when it comes to the next gen iPhone, Apple’s forward guidance might now provide some hints about the iPhone 8: The company expects gross margin to be between the range of 37.5% and 38% next quarter. This is significant as it is lighter than the gross margins of 38.3% predicted by analysts surveyed by StreetAccount.
Additionally, Apple said on Tuesday it forecasts Q4 revenue to be between $49 billion and $52 billion, which is a tad bit on the heavy side. Analysts surveyed by Thomson Reuters had expected the company to forecast $49.21 billion in revenue for the fiscal Q4.
Speaking of the iPhone 8, the 10th anniversary phone is expected to introduce game-changing features like edge-to-edge screens and AR capabilities as soon as September. As a result, CEO Cook said that the rumours about the iPhone 8 have decreased the excitement for Apple’s current model, the iPhone 7.
Regardless of the revenue beats and iPhone 8 excitement, Apple still has its fair share of challenges. Even more so in China, where sales dropped 10% year-over-year this quarter and 14% year-over-year last quarter. However, Cook told CNBC that Apple still feels “great” about Q3 performance in China.
Since 2009, Apple has beaten its earnings per share estimates 88% of the time and revenue estimates 76% of the time, according to Birinyi Associates data.
Featured Image: twitter
