Apple books record profit on strong iPhone sales
Apple reported new records for both revenue and income during its holiday sales period, achieving one of the biggest quarterly profits for any company and helping to justify a stock price that has more than doubled in the last year.
The Cupertino-based tech giant said revenues rose 9 per cent to $91.8bn in the quarter ended December 28, as iPhone revenues climbed 8 per cent and sales of AirPods and watches accelerated along with its services division.
Net profit grew 11 per cent to $22.2bn, enough to surpass its $20.1bn record quarter from two years ago. Earnings per share were even better, climbing 19 per cent to $4.99.
Both top-line and bottom-line figures were significantly higher than projections, which had estimated revenues at $88.1bn and profits at $20.1bn, according to an analyst poll compiled by Visible Alpha.
“We are thrilled to report Apple’s highest quarterly revenue ever, fuelled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables,” chief executive Tim Cook said in a statement.
Mr Cook said Apple’s “active installed base” of devices, including iPhones, laptops and iPads, is now above 1.5bn versus 1.4bn a year ago. “We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board.”
For the current quarter Apple is projecting between $63bn and $67bn of revenue, a gain of 9 to 15 per cent.
Chief financial officer Luca Maestri said the range was “unusually wide” to account for “potential impact” across the supply chain from the effects of the coronavirus. “The situation is unfolding, it’s very new,” he said. “That’s the reason we put a wider range on our guidance.”
He added that Apple had suppliers in the Wuhan areas that are being isolated, but that Apple had mitigation plans to source components from elsewhere if needed.
Apple’s stock has more than doubled in the last year, reaching a $1.4tn market capitalisation. The rally set expectations high for a strong quarter but analysts had assumed iPhone sales would be stagnant or lower. Instead, they grew from $52bn a year ago to $56bn.
Sales of the iPhone accounted for 61 per cent of total revenue in the quarter, whereas last July its share had fallen to 48 per cent — the lowest since 2012.
Apple’s services division, encompassing App store revenue, streaming content and warranties, posted revenues up 17 per cent to $12.7bn. Wearables revenue, led by AirPods and the Apple watch, grew 37 per cent to $10bn.
“Looks like Apple smashed it with an outstanding performance,” said Paolo Pescatore, analyst at PP Foresight. “This underlines Apple’s unique position to combine devices and services together that drives significant value.”
Apple shares were up almost 2 per cent in after-hours trading at $323.50, on top of a 2.8 per cent gain during normal trading hours on Tuesday before the results were released. It reached a record closing price of $319.23 last week.
One reason Apple stock has surged is that investors are looking ahead to September, when it is widely expected Apple will launch the first 5G-enabled iPhone. Even though multiple rivals have already released 5G handsets, investors see Apple’s arrival to the market as the start of a new “supercycle” for iPhone sales and upgrades.
“For investors who are bullish like I am, the hope is that the December quarter is a sign of things to come in 2020,” said Tom Forte, analyst at DA Davidson.