Yesterday was Apple’s moment to steal the ‘reporting season’ limelight as the technology giant surpassed the expectations of Wall Street analysts with the announcement of record fourth quarter revenues. The company offered forward guidance on fourth quarter sales it expects to fall between $85.5 billion and $89.5 billion. The middle of that range would mean it beats analyst projections for $86.7 billion, and prompted investors to push the Apple share price up by a little over 2% in afterhours trading.
If that gain is held or improved upon by the time markets open on Wall Street today, it will see Apple regain its position from Microsoft as the most valuable company in the world.
Apple, the brand behind the consumer tech era-defining iPhone, Mac computers, iPads, AirPods earphones and, increasingly services such as the app store, Apple Music, iCloud and soon to launch Apple TV+, closed yesterday with an overall market capitalisation of $1.1 trillion. Recognising that ‘peak iPhone’ has almost certainly already been and gone, Apple’s strategy is to continue to drive growth through a growing focus on services to compliment and further monetise its hardware ecosystem.
The iPhone does, however, still account for approximately half of all of Apple’s revenues. But that is now falling. Over the three months leading up to September 28th, sales of the smartphones, including early orders for the new iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max models released on September 20, led to revenues of $33.4 billion. That’s a decline on last year’s $36.8 billion over the same period. However, sales of $12.5 billion across the company’s services unit which includes Apple Pay, up from $10 billion a year ago, made up a good part of the shortfall. Services revenues also crucially came in ahead of analyst forecasts for $12.2 billion.
CEO Tim Cook was also optimistic on Apple’s prospects over the fourth quarter, which, including the all important holiday season, is typically the company’s strongest. He also revealed Apple are confident that the running trade dispute between the USA and China will be resolved in the near future, commenting:
“I don’t know every chapter of the book, but I think that [an end to hostilities] will eventually happen. I certainly hope it happens during the quarter, but we’ll see about that.”
A drop in sales in China coming as a negative side effect of strained economic relations between the two superpowers has recently proven problematic to iPhone sales numbers. That was still in evidence yesterday, with Apple’s sales in China dropping to $11.1 billion from $11.4 billion a year earlier.
The latest edition to Apple’s services ecosystem will be Apple TV+, which will launch tomorrow. The content streaming platform will compete with, or compliment, Netflix, Amazon Prime and new streaming services also being launched by Disney and AT&T.
Another positive development was growth in sales of wearables, home devices and accessories, which leapt to $6.5 billion from $4.2 billion a year ago. That was another figure that came in ahead of analyst forecasts for $5.9 billion.