iPhone X, subscriptions help Apple beat quarterly targets

Apple staff looking at buyers queueing ahead of the sale of the iPhone X at the Apple store in Sydney last November. The California company has responded to a plateauing global smartphone market by launching more expensive phones and diversifying int
Apple staff looking at buyers queueing ahead of the sale of the iPhone X at the Apple store in Sydney last November. The California company has responded to a plateauing global smartphone market by launching more expensive phones and diversifying into services.PHOTO: EPA-EFE

SAN FRANCISCO • Apple sales led by the pricey iPhone X pushed quarterly results far beyond Wall Street targets on Tuesday, with subscriptions from App Store, Apple Music and iCloud services bolstering business.

The world's most valuable technology company also forecast revenue above expectations for the autumn, when it typically launches new iPhone models, reassuring a nervous tech sector that saw sell-offs last week in Facebook, Twitter and Netflix on concerns about their future growth.

The California company has responded to a plateauing global smartphone market by launching more expensive phones and diversifying into services, prospering even as rival Samsung Electronics missed targets for its flagship Galaxy S9 and China's Huawei Technologies took the No. 2 global smartphone sales spot.

Apple also regained growth in China, where sales rose 19 per cent.

Sales there fell dramatically in 2016 after Chinese consumers shunned the iPhone 7, whose overall appearance differed little from its predecessor.

And a US$20 billion (S$27.2 billion) stock buyback in the quarter spurred by sweeping United States corporate tax cuts brought Apple's buyback tally this year to a record US$43 billion and exceeded the stock market value of almost three-quarters of the companies in the S&P 500.

"The lesson Apple's management has learnt from the iPhone X is, when you sell a smartphone for more than US$1,000, you can sell fewer units and still reap the financial benefits," said analyst Thomas Forte from DA Davidson & Co.

PRICE IT RIGHT

The lesson Apple's management has learnt from the iPhone X is, when you sell a smartphone for more than US$1,000, you can sell fewer units and still reap the financial benefits.

ANALYST THOMAS FORTE , on Apple's quarterly results.

Apple sold 41.3 million iPhones in the fiscal third quarter, half a million fewer than expected, but the average iPhone selling price topped expectations by US$30, hitting US$724, according to FactSet.

Apple chief financial officer Luca Maestri told Reuters that customers were buying costlier models and the US$999 iPhone X was the quarter's bestseller.

Apple posted third-quarter revenue of US$53.3 billion and profits of US$2.34 per share, compared with analyst estimates of US$52.3 billion and US$2.18 per share respectively, according to Thomson Reuters.

It also forecast revenue of US$60 billion to US$62 billion for its fiscal fourth quarter, which will include early sales of soon-to-be-announced phone models, beating the US$59.6 billion that analysts expected.

Chief executive Tim Cook credited "wearables", a category that includes wireless earphones and the Apple Watch, with making growing contributions.

Mr Maestri told Reuters that Apple could not keep up with demand for AirPods headphones.

Service revenue was US$9.5 billion, beating analyst expectations of US$9.1 billion.

Apple executives emphasised the recurring nature of much of that revenue, saying the company had reached 300 million subscriptions on its devices, a figure that includes both Apple's own services such as music and third-party subscriptions such as Netflix, where Apple takes a cut of the revenue when it handles the billing.

Mr Cook said Apple Music has more than 50 million users when free trials are counted and hinted at the company's video content efforts.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 02, 2018, with the headline 'iPhone X, subscriptions help Apple beat quarterly targets'. Print Edition | Subscribe