NEW YORK (BLOOMBERG) - Apple projected better-than-expected quarterly sales, suggesting demand for iPhones has stabilised after a disappointing holiday period. Shares of the mobile technology giant rose about 5 per cent in extended trading.
The company also reported solid revenue growth from its Services business as consumers sign up for a growing smorgasbord of digital subscriptions.
"IPhone clearly was in line or a little bit above expectations," said Shannon Cross, an analyst at Cross Research. "Given how conservative people were going into the quarter, that's why you're seeing a positive reaction in the stock market."
The Cupertino, California-based company said on Tuesday (April 30) that fiscal third-quarter revenue will be between US$52.5 billion and US$54.5 billion (S$71.5 billion and S$74.1 billion).
Analysts, on average, were looking for US$52.2 billion, according to data compiled by Bloomberg. Fiscal second-quarter results also beat Wall Street expectations.
Apple shares have surged more than 40 per cent from a 21-month low in early January after lacklustre iPhone sales prompted the company to cut its holiday revenue forecast. The stock fell 1.9 per cent to close at US$200.67 in New York earlier on Tuesday.
Fiscal second-quarter sales fell 5.1 per cent from the period a year ago to US$58 billion. Analysts estimated US$57.5 billion, according to Bloomberg data. Apple had forecast revenue between US$55 and US$59 billion.
Net income was US$11.6 billion, or US$2.46 a share, compared with US$13.8 billion, or US$2.73 a share, a year earlier. Analysts estimated US$2.37 per share.
Apple ended all litigation with Qualcomm in April and agreed to start using the chipmaker's modems again. That ended a bruising two-year battle over technology underpinning all smartphones. Apple had withheld billions of dollars in supplier-related payments as part of the legal fracas.
Revenue from iPhones declined 17 per cent from a year earlier to US$31 billion. Wall Street expected US$30.5 billion, according to the average of six analyst estimates compiled by Bloomberg.
IPhone revenue is slipping because people are holding onto their handsets longer. Slower economic growth and cheaper rivals in China also dented sales during the key holiday period. Apple ran promotions this year that lowered iPhone prices, making the devices more competitive in China. That sparked optimism that iPhone revenue would stabilise.
Apple said its gross margin, a closely watched measure of profitability, will be 37 per cent to 38 per cent in the fiscal third quarter. Analysts were looking for 37.6 per cent. That forecast sparked optimism that the company isn't discounting iPhones too much to clear unsold inventory. A decline in memory chip prices also likely helped Apple.
Services revenue rose 16 percent to US$11.45 billion in the fiscal second quarter. That was slightly ahead of Wall Street expectations.
Apple is looking to diversify through additional devices and services. It recently introduced an online news service for US$9.99 a month. Later this year, the company plans to launch a credit card, a gaming subscription service and an original video-streaming offering.
All these services will generate more recurring revenue for Apple, but they face well-established rivals, such as Netflix, and new rivals including Walt Disney. The success of Apple services also depend on how many iPhones and other Apple devices are in use.
"Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category," Apple chief executive officer Tim Cook said in a statement.
