Apple’s quarterly results have beaten market expectations — driven by its sales of fewer, but more expensive, iPhones and revenue from services like the App Store, Apple Music and iCloud.
Shares of the world’s most valuable technology company jumped 3.9 per cent, in after-hours trade, to $US197.69 (at 5:25pm, local time).
Apple sold 41.3 million iPhones, slightly below the 41.8 million units that analysts expected.
The average iPhone selling price hit $US724, beating analyst expectations of $US694, according to data from FactSet.
Boosted by iPhone X sales
The company’s chief financial officer Luca Maestri said customers were buying costlier models, and the $US999 iPhone X was the best seller.
Apple posted third-quarter revenue of $US53.3 billion and profits of $US2.34 per share, and forecast its revenue would be between $US60 billion and $US62 billion in the fourth quarter.
As smartphone buying has plateaued, Apple has extended its iPhone line with both pricier and cheaper versions, from the iPhone X to the lowest priced $US349 iPhone SE.
Markets at 7:00am (AEST):
- ASX SPI 200 futures +0.3pc at 6,237, ASX 200 (Tuesday’s close) flat at 6,280
- AUD: 74.26 US cents, 56.54 British pence, 63.5 Euro cents, 82.03 Japanese yen, $NZ1.09
- US: Dow Jones +0.4pc at 25,415, S&P 500 +0.5pc at 2,816, Nasdaq +0.6pc at 7,672
- Europe: FTSE +0.6PC at 7,749, DAX +0.1pc at 12,806, CAC +0.4pc to 5,511 Euro Stoxx 50 +0.5pc at 3,529
- Commodities: Brent crude -1pc at $US74.25/barrel, spot gold +0.2pc at $US1,223.41/ounce
It has also soothed investor concerns with a $US100 billion stock buyback program, and promises of growth from services such as streaming music and video — where Apple faces competition from rivals including Spotify and Netflix.
But several of Apple’s services do not face strong rivals.
Mr Maestri said sales from Apple Care, the company’s warranty offering, were up 27 per cent versus a year ago, though the company did not disclose a dollar figure for sales.
Trade war impact
Apple was largely spared in last week’s tech sector sell-off when shares of Facebook, Twitter and Netflix fell sharply on concerns about their future growth.
With a total market value of more than $US900 billion, Apple is tickling at the title of world’s first trillion-dollar company.
Apple’s best-selling products do not yet face duties stemming from the US-China trade disputes, but US President Donald Trump has threatened hundreds of billions of dollars in further tariffs on product categories not yet been enumerated.
But one of the categories potentially affected by tariffs is the Apple Watch, which is one of Apple’s growth drivers.
Mr Maestri said the company’s so-called “wearables” business — which includes the Apple Watch and its AirPods headphones, among other items — has generated $US10 billion in sales in the past 10 quarters and saw sales increase 60 per cent in the most recent quarter.
“We are not able to catch up to demand yet and continue to add capacity for the AirPods,” Mr Maestri said.
Apple’s margins are facing pressure as it moves to put pricier components, such as OLED displays that show more vivid colours, into its products.
The company said it expected gross margins of 38 to 38.5 per cent in the fourth quarter, compared with analyst expectations of 38.3 per cent, according to Thomson Reuters data.
Wall Street rebounds
US markets recovered overnight, led by gains in industrial stocks, following reports that the United States and China were renewing their trade negotiations to prevent the trade war from escalating.
Industrial stocks, which have been a proxy for recent trade tensions, were the best performers overnight.
It pushed the Dow Jones Industrial Average higher by 0.4 per cent to 25,415. The S&P 500 and Nasdaq closed 0.5 and 0.6 per cent higher, respectively.
Looking back at July, the Dow rose 4.7 per cent and the S&P 500 gained 3.6 per cent — their best monthly performance since January.
The Nasdaq lifted by more than 2 per cent last month.
After sliding for the last three trading days, the “FANG” stocks put in a mixed performance. Facebook (+0.9pc) and Netflix (+0.7pc) regained ground, while Amazon (-0.1pc) and Google (-0.2pc) fell.
Technology stocks have lost 5.4 per cent during that period, after some mixed results from the largest companies in the sector.
Facebook reported weaker-than-expected revenue last week, while Twitter posted fewer-than-expected monthly users for the previous quarter.
Australian market today
Australian shares are expected to rise this morning, boosted by Wall Street’s stronger performance and reports of further US-China trade negotiations.
The Australian dollar has strengthened against major currencies, rising 0.4 per cent to 74.3 US cents.
It also lifted against the British pound (+0.4pc), Euro (+0.4pc) and Japanese yen (+1pc).