Apple earnings top analysts’ forecasts but year-over-year sales drop again
Apple made a slightly higher profit last quarter even though sales dipped during the period – a time during which the iPhone maker became the first publicly held company in the US to be valued at 3 trillion dollars.
The results released on Thursday covered April to June, the third consecutive quarter that Apple has posted a year-over-year decline in revenue. That is its longest stretch of declining sales in nearly seven years.
Revenue totalled 81.8 billion dollars (£64.4 billion), down 1% from last year. Profit edged up by less than 1% from a year ago to 19.9 billion (£15.6 billion), or 1.26 dollars per share.
The earnings were better than the 1.20 dollars per share projected by analysts polled by FactSet Research, while revenue matched analyst forecasts.
But iPhones sales — the product segment watched most closely by Wall Street — fell 2% from a year ago to 39.7 billion dollars (£31.24 billion), below analysts’ predictions.
Apple’s stock declined by about one per cent in extended trading after the numbers came out.
What do the markets make of Apple?
Dan Coatsworth, stock market analyst at AJ Bell, warned that “some of the most successful businesses in the world are the ones who create an ecosphere. Customers initially sign up for one service and then slowly add more, to the point where they become so reliant on them that switching elsewhere is unfathomable. Apple is the master of this game.”
“It has developed a reputation for selling premium-priced hardware that has different functionality to rivals. Once someone has bought a laptop, a phone or something else, Apple then upsells a range of services – and it’s this part of the business which has become a key profit driver as the margins are spectacular.”
He added that “the number of paying subscribers for its digital services has exceeded one billion worldwide. Without this success, the market would have been a lot more worried about its earnings given that iPhone and iPad sales were lacklustre.
“The services arm provides a welcome cushion to the group, but Apple still needs to revive hardware sales growth otherwise the market is going to worry about the next generation of customers to join its ecosphere.
“It is time for Apple to launch something new and innovative, not just another variation of its core products.”
Meanwhile, Ben Barringer, equity research analyst at Quilter Cheviot, said “Apple’s results were somewhat disappointing, especially in the light of how the other tech players are doing”.
“The main takeaway from these results is that Apple is transitioning somewhat to be more of a services company, although hardware will always play its part and what it is known for. Areas such as the iCloud, Apple Pay etc. are doing very well and now account for 26% of revenues.”
Barringer added that the fact Apple now has over $10bn in its high yield savings account is “a great achievement in a short space of time and highlights its potential as a financial services behemoth.”
“That said, Apple is guiding to a similar decline in growth for the next quarter. Other tech giants have navigated the uncertain environment much more efficiently and as such for investors we prefer them over Apple,” he explained.
Michelle Liedtke, PA – Associated Press