Apple jumps after strong third-quarter report

Apple CEO Tim Cook speaks at Apple's Worldwide Developer Conference (WWDC) at the San Jose Convention Center in San Jose, California on Monday, June 4, 2018.

Josh Edelson | AFP | Getty Images
Apple CEO Tim Cook speaks at Apple’s Worldwide Developer Conference (WWDC) at the San Jose Convention Center in San Jose, California on Monday, June 4, 2018.

Apple reported strong third-quarter results Tuesday, posting big beats on earnings per share and average iPhone selling price.

Here’s how the company did compared with Wall Street projections:

  • EPS: $2.34 vs. $2.18, according to Thomson Reuters consensus estimates
  • Revenue: $53.3 billion vs. $52.34 billion, according to Thomson Reuters consensus estimates
  • iPhone sales: 41.3 million vs. 41.79 million, according to StreetAccount

The quarterly report comes after a market rout for major tech stocks. Silicon Valley giants Facebook and Twitter each shed 20 percent after disappointing reports last week.

Shares of Apple rose 2 percent in extended trading.

Apple fell right in line with analyst projections for strong upsides. EPS grew by 40 percent year-over-year, and revenue grew by 17 percent year-over-year.

Many were hanging high hopes on Apple’s flagship handset and its climbing average selling price (ASP). The 41.3 million iPhones shipped during the third quarter is basically flat from the year-ago period, but the ASP of $724 is a notable jump from the year-ago period. That ASP bump is likely be because of the pricey iPhone X, which starts at $999.

Wildcards

Services: Investors have been watching closely as Apple ups its software and services revenue — a catch-all category that includes the App Store, Apple Care, Apple Pay, iTunes and cloud services. The segment has been outpacing iPhone revenue growth for several quarters.

Apple posted $9.55 billion in software and services revenue for the third quarter, beating out Wall Street estimates of $9.21 billion. CEO Tim Cook said in January 2017 the company hoped to double services revenue to more than $14 billion a quarter by 2020. Wall Street analysts predicted the segment would generate $9.2 billion for the third quarter.

Forward-looking guidance: Apple’s most recent quarterly reports have been weighed down by speculation of smartphone market saturation and the end of the so-called “supercycle.” So as Apple looks ahead to its fiscal fourth quarter, when it traditionally introduces new iPhone models, the company’s guidance could shed light on Apple’s ongoing handset ambitions. Apple typically launches new iPhone models at the end of the quarter, in mid-September.

Apple guided toward fourth-quarter revenue between $60 billion and $62 billion, edging out Wall Street predictions of $59.47 billion, according to StreetAccount.

China: Apple has so far avoided the fallout of an ongoing trade war with China. But with each country ratcheting up tariffs, Apple’s deep roots in China could start to feel the effects. Much of Apple’s supply chain is in China, and the mainland country accounts for the company’s second-largest source of revenue, according to FactSet, behind only the U.S.

The company attributed $9.55 billion in revenue to Greater China, an increase of 19 percent year over year.

 

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