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Apple sees quarterly sales and profits top expectations as iPhone sales rose for first time in a year

Last updated: 09:50 29 Jan 2020 EST, First published: 02:50 29 Jan 2020 EST

iPhones
iPhone sales of $55.96 billion in the quarter beat analyst estimates of $51.6 billion

Apple Inc (NASDAQ:AAPL) shares rose on Wednesday after the tech giant reported quarterly sales and profits that topped Wall Street expectations after-hours on Tuesday thanks to rising iPhone sales for the first time in a year.

The Nasdaq-listed firm also forecast revenue for the quarter ending in March above Wall Street expectations.

READ: Apple closes historic 2019 for Services offerings with double-digit App Store growth

Apple also highlighted soaring demand for add-ons like AirPods wireless headphones in its fiscal first quarter, although there was a slight revenue miss in the company’s services business, which includes the new Apple TV+ streaming offering.

For the quarter ended December 28, Apple reported revenue of $91.8 billion compared with analyst estimates of $88.5 billion, with reported earnings per share of $4.99, compared with analyst estimates of $4.55 per share.

iPhone sales of $55.96 billion in the quarter beat analyst estimates of $51.6 billion and year-before sales of $52 billion.

Apple’s wearables segment – which, along with AirPods, also includes the Apple Watch – saw revenue of $10.0 billion versus estimates of $9.5 billion, up sharply from $7.3 billion the year before.

But Services revenue was $12.7 billion, below analyst estimates of $13 billion, albeit up from $10.9 billion the year before.

Coronavirus outlook uncertainty

The strong quarterly performance outweighed concerns about the possible impact from the current coronavirus outbreak in China, which is a major market and manufacturing hub for Apple.

The company forecast revenue for the quarter ending in March would be $63.0 billion to $67.0 billion, ahead of estimates of $62.4 billion.

Apple chief Executive Tim Cook told Reuters that the company has issued a wider-than-normal prediction range because of the uncertainty created by the coronavirus.

“We have limited travel to business-critical situations as of last week,” he told the newswire.

“The situation is emerging, and we’re still gathering lots of data points and monitoring it very closely.”

Apple shares were up 1.5% to $322.54 in the first hour of New York trading, matching its after-hours rise.

Sustained growth in physical products

In reaction to the Apple numbers, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown commented: “iPhone sales have comfortably beaten market expectations in the first quarter, suggesting the latest models have been a force to be reckoned with.

“Since iPhones make up over half of all sales that’s good going, particularly with the advances between different phone models becoming more nuanced and harder to differentiate, leading to a much more crowded marketplace. Overall hardware sales have probably benefitted from Phase 1 of a trade deal between the US and China, saving Apple from burdensome tariffs.”

She added: “Sales did slip in iPads and Macs, but an impressive showing from wearables and accessories more than offset those declines. In total there are now over 1.5bn active apple products in the world. Sustained growth in physical products is a core part of Apple’s story, because it feeds into a lucrative web.

“The integration of things like iMessage across various products including Macs, iPhones and Apple Watches means people are more likely to select other Apple products in the future if they already own one. That makes Apple customers particularly sticky and is a key pillar in the group’s modus operandi. Growth in Services is likely a function of the extra devices, as people turn to the App Store or Apple Music when they get their new phones, and this is an attractive, high margin area of the business. Apple is sowing the seeds for future growth.”

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