Apple drops on weak outlook despite four-quarter record streak
Apple turned in a fourth consecutive quarter of record revenue and profits on Thursday, as higher iPhone price and solid app store sales drove the tech behemoth to its best year in history.
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Increased demand for services such as the iCloud, Apple Music and the App store helped drive revenues almost 20% higher in the three months ended 29 September to $62.9bn, slightly ahead of forecasts, while profits soared 32% to $14.13bn.
There were 46.9 million iPhones sold in the fiscal fourth quarter, about flat with the 46.7 million sold last year but below the 47.6 million sales that analysts expected.
Global iPhone sales for the entire year were up 1% year-on-year at just under 218 million but increased prices helped the most valuable company in the world deliver record annual revenues of $265.6bn - a 14% rise over its previous high back in 2015.
However, Apple’s guidance for its current quarter somewhat disappointed investors, as the company revealed that revenues in the all-important holiday period looked set to come in between $89bn and $93bn - short of analysts’ consensus estimates of $92.94bn. Revenues in the Christmas quarter came to $88.3bn last year.
Furthermore Apple said it would stop reporting unit sales for iPhones, iPads, and Macs beginning in its 2019 fiscal year.
Chief financial officer Luca Maestri claimed Apple’s lower forecast was a result of the group having introduced its most expensive iPhones to date back in September, as opposed to the November release date for the iPhone X back in 2017. He also noted that woes in developing markets such as Turkey and Brazil had caused sales to weaken.
“We are starting the new year with a lot of confidence and the strongest product lineup we’ve ever had,” said Maestri, who noted that he still expects the firm to report another record quarterly revenue.
The weaker sales forecast for the crucial holiday season being combined with the news that Apple will no longer give a breakdown of product sales was, said market analyst Jasper Lawler at LCG, being interpreted as a signal of declining unit sales going forward.
Citigroup analyst Jim Suva said that "some people may fear that this now means that the iPhone units are going to start going negative year-over-year because it's easy to talk about great things and not show the details of things that aren't so great."
Gene Munster, analyst at Loup Ventures, said: “I was shocked, but it makes sense. Apple wants investors to focus less on iPhone units, and more on the overall Apple business. It’s going to take a few quarters for Apple to win investor confidence in this new way of analyzing the Apple story.”
Apple saw iPhone revenues increase 29% to $37.18bn after it upped the starting price for its flagship device by roughly 50% to just short of $1,000, while its services business, including app-store sales, Apple Pay use and Apple music subscriptions, reported record revenues of $9.98bn - a 17% year-on-year increase.
Looking forward, Apple hopes to capitalise on the price increase acceptance seen with the iPhone to its other devices, raising prices on its updated smartwatches, Macs and iPads by more than 20%.
As of 2240 BST, Apple shares had crashed 6.39% in after-hours trading to $208.01 each.