Despite doubts about Apple's iPhone business, the company scored a win Tuesday by surprising analysts with the smartphone's continuing appeal.
The tech giant reported $42.4 billion in revenue for its third quarter. While that is a drop of 14.6 percent from the same period last year - the second quarter in a row that Apple's revenue has dropped - it beat analyst projections of $42.09 billion. The company reported a quarterly profit of $7.8 billion, down 27 percent from the same time last year.
Concerns about iPhone sales dogged the company ahead of the earnings report as analysts worried about slumping sales of its flagship phone. But Apple beat expectations there as well, reporting sales of 40.4 million iPhones, which slightly beat projections of 40 million. Profit on the iPhone was also down, probably because the company's latest model, the iPhone SE, is not aimed at the very top end of the smartphone market.
"We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter," Tim Cook, Apple's chief executive, said in a statement.
The real growth category for Apple was its services, which grew 19 percent year over year; Cook said on the earnings call that Apple expects this business alone to be the same size as a Fortune 100 company next year. That could explain why Apple is focusing so heavily on the services and content portion of its business. On Tuesday, Variety reported Apple has bought the exclusive rights to a series called "Carpool Karaoke," based off the popular celebrity singalong segment on the "The Late Late Show with James Corden."
"The industry is pressuring Apple to reveal the next big source of growth beyond the iPhone, but the reality is that this is extremely unlikely to come from a single new product," said Geoff Blaber, vice president at the analysis firm CCS Insight. "Apple's strength is its ecosystem, and services revenue growth is the biggest indicator of its long-term health."
Apple said it expects revenue between $45.5 billion and $47.5 billion in its next quarter, slightly less than its guidance in the same period last year. Analysts say that Apple's new iPhone this fall will come with a few incremental changes and that the firm will wait until 2017 to release a major upgrade to its smartphone.
Still, the earnings announcement was enough to keep its shares up in after-hours trading. Shares closed at $96.67 per share, then jumped as much as 7 percent.
That's good news for Apple, particularly after its chief rival, Samsung, announced that its latest Galaxy S7 phones are selling so well that its profits should hit a two-year high when it reports earnings Thursday.
The smartphone market has seen growth slow for several quarters. In fact, 2017 could be the first year that the five largest technology categories - smartphones, tablets, computers, televisions and laptops - make up less than half of the industry's revenue, according to Consumer Technology Association economist Shawn DuBravac.
Yet sales of the iPad were also slightly above expectations, with 10 million units sold, though still down from the same period last year. Apple sold 4.3 million Macs.
The question for Apple now is whether its new ventures can grow quickly enough to compensate for shrinking revenue from the smartphone business, which makes up 56 percent of Apple's revenue. Pessimism about the company's ability to reclaim its former mantle of innovation will be hard to dispel.
"When we ask ourselves 'Do we see Apple gaining or losing its next $100 billion of value,' the answer is losing," wrote Colin Gillis, an analyst for BGC Partners, in a Monday note. He has downgraded Apple's stock to "sell."
The Washington Post
Wed Jul 27 2016
Apple said it expects revenue between $45.5 billion and $47.5 billion in its next quarter, slightly less than its guidance in the same period last year.
Who is Prabowo Subianto, incoming president of Indonesia?
A wealthy ex-general with ties to Indonesia's popular outgoing president and its dictatorial past, looks set to be its next leader.
Iran's supreme leader says Hamas leader's death will not halt 'Axis of Resistance'
The "Axis of Resistance", built up with years of Iranian support, includes Hamas, the Lebanese Hezbollah group, the Houthi movement in Yemen, and various Shi'ite groups in Iraq and Syria.
Putin says Russia willing to seek compromises between Iran and Israel
Russia is ready to help seek compromises between arch-foes Israel and Iran, President Vladimir Putin said on Friday, saying these would be difficult but possible.
What proposals will Russia push at the BRICS summit?
The proposal is also to establish a BRICS reinsurance company to allow uninterrupted shipment of goods and key commodities between members.
Indonesia's free meals plan in the spotlight as Prabowo readies for office
Prabowo calls the programme one of the main drivers of economic growth, eventually set to add an estimated 2.5 million jobs.
Astro AWANI's revamped English news website, AWANI International, launches on Oct 21
Astro AWANI's revamped English platform delivers in-depth global news and expert analysis to keep you informed on key developments.
Israeli strikes kill 33 people in Jabalia refugee camp in Gaza, medics say
Residents of Jabalia said Israeli tanks had reached the heart of the camp after pushing through suburbs and residential districts.
Liam Payne's ex-partner calls for media restraint after 'painful' death
Cheryl Tweedy used her statement to urge the media to remember they had a seven-year-old son, Bear, who could read the reports.
Analysts: Indonesia's strong MoF leadership team to boost investor confidence
Sri Mulyani Indrawati as head of Indonesia's Ministry of Finance is expected to instil confidence among investors.
Biden offers both a carrot and a stick to Israel as his term nears an end
Israel has frequently resisted US advice and has caused political difficulties for the Biden administration.
Putin says BRICS will generate most of global economic growth
Russian President Vladimir Putin will host a summit of the group in the city of Kazan on Oct. 22-24.
ISIS Malaysia's perspective of Budget 2025
An excellent rakyat-centric budget under the overarching principle of a caring and humane economy.
Budget 2025: Record increase in STR, SARA aid initiatives
The government will provide a significant boost to the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) initiatives next year.
Budget 2025: EPF contributions to be made mandatory for foreign workers – PM Anwar
The government plans to make it compulsory for all non-citizen workers to contribute to the Employees Provident Fund (EPF).
What policies to expect from Indonesia's new President Prabowo
Prabowo will be open to foreign investment, his aide has said, such as by offering investors management of airports and sea ports.
Budget 2025: Govt allocates RM470 mil to empower women's participation in PMKS
The Women's Leadership Apprenticeship Program will be intensified as an effort to produce more female corporate personalities.
Israel sends more troops into north Gaza, deepens raid
Residents of Jabalia in northern Gaza said Israeli tanks had reached the heart of the camp, using heavy air and ground fire.
Indonesia ramps up security ahead of Prabowo's inauguration
Prabowo Subianto will be sworn in as Indonesia's president on Sunday with Vice President-elect, Gibran Rakabuming Raka, also taking office.
Immediate allocation of RM150 mil for local authorities, DID to tackle flash floods
Datuk Seri Anwar Ibrahim said this allocation is intended to address the recent flash floods that hit the capital and several major towns.
Budget 2025: Sabah, Sarawak to continue receiving among highest allocations - PM
Sabah and Sarawak continues to be prioritised under Budget 2025, with allocations of RM6.7 billion and RM5.9 billion respectively.