Apple's net profit hits record high on strong iPhone sales

SAN FRANCISCO • Apple on Tuesday reported that sales and profits for the holiday shopping quarter were above expectations, powered by a rise in iPhone sales for the first time in a year and soaring demand for add-ons like the AirPods wireless headphones.

The strong performance outweighed concern about the coronavirus in China - a major market as well as manufacturing hub for Apple - and a slight revenue miss in the company's closely watched services business, which includes the new Apple TV+ streaming offering.

Shares of Apple rose 2 per cent in after-hours trade.

Apple gave a revenue forecast for the quarter ending in March above Wall Street expectations.

Chief executive Tim Cook told Reuters that the company was using a wider-than-normal prediction range because of the uncertainty created by the coronavirus outbreak in China. He said Apple has shut one store in China and reduced hours at others, and is restricting employee travel.

"We have limited travel to business-critical situations as of last week," he added. "The situation is emerging and we're still gathering lots of data points and monitoring it very closely."

Apple has suppliers in the Wuhan area, the heart of the outbreak, but has alternatives, Mr Cook said.

He said factories outside the Wuhan area also faced delayed reopenings after the Chinese New Year holiday, until Feb 10.

The number of active iPhones, computers and other devices owned by customers, called the installed base, grew by 100 million to more than 1.5 billion over the past year, and Apple executives set a new target of 600 million paid subscribers for music, TV, gaming and other services by the year end.

Net profit hit an all-time high of US$22 billion (S$29.9 billion) on record quarterly revenue of US$91.8 billion for the quarter ended Dec 28, compared with analyst estimates of US$88.5 billion in revenue, according to IBES data from Refinitiv.

The company forecast US$63 billion to US$67 billion in revenue for the quarter ending in March, ahead of estimates of US$62.4 billion, showing it believes that its phones and other devices will continue to sell well during what is often a slow time of year.

Apple reported services revenue of US$12.7 billion, below analyst estimates of US$13 billion, and up from US$10.9 billion the year before.

The shift towards services, however, depends on Apple continuing to grow its base of users and sign them up for recurring subscriptions that analysts view as potentially more lucrative than hardware sales, which can be inconsistent because they are large purchases that consumers make only every few years.

Apple said it now has more than 1.5 billion active installed devices and 480 million subscribers to both its own and third-party paid services, compared with 1.4 billion devices and 360 million subscribers a year earlier.

REUTERS