Published: Wed, August 01, 2018
Finance | By Gustavo Carr

Apple surprises Wall Street with record-breaking Q3 profits

Apple surprises Wall Street with record-breaking Q3 profits

Profits hit $US11.5 billion, up from $US8.7 billion a year ago, while total sales climbed 17 per cent to $US53.3 billion, due to increasing revenues from the iPhone's App Store and sales of peripherals such as the Apple Watch and the company's headphones.

Apple said its gross profit margin will be 38 per cent to 38.5 per cent in the fiscal fourth quarter, versus analysts' estimates of 38.2 per cent.

Globally, higher selling prices for devices like the iPhone X and iPhone 8 pleased Wall Street analysts. Research firm IDC says that the iPhone is growing faster than the global smartphone market, according to Apple.

The news sent Apple stock up as much as 3 percent after the market closed, pushing the company's market cap ever closer to the coveted $1 trillion mark.

Also drawing positive scrutiny are Apple's "other products" which includes AirPods earphones and HomePod speaker systems.

Cook said the services revenue is mainly driven by more people entering the Apple ecosystem and announced that paid subscriptions surpassed 300 million, a 60 percent year-over-year growth.

The trajectory puts Apple well on its inevitable path to becoming the first $1 trillion company in market value this year.

Apple (NASDAQ:AAPL) posted the strongest third quarter in the company's history since it managed to beat analyst expectations for earnings per share and revenue.

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Analysts were looking for 41.6 million iPhone units in the quarter, and an average selling price of US$699, according to estimates compiled by Bloomberg News.

But Apple missed expectations for iPhone sales with 41.3 million units sold in the last quarter.

Revenue rose 17 per cent to Dollars 53.27 billion, also exceeding Street forecasts for USD 52.37 billion. That's because the pricy iPhone X has been performing well; it has consistently been the best-selling iPhone since it launched last November.

"Our strong business performance drove revenue growth in each of our geographic segments, net income of $11.5 billion, and operating cash flow of $14.5 billion", Luca Maestri, Apple's CFO, said in a statement.

Apple is looking at whether it will be hit by tariffs on purchases the company must make, possibly "related to data centers", Cook said on a conference call with investors.

But one of the categories potentially affected by tariffs is the Apple Watch, which is one of Apple's growth drivers.

"We are not able to catch up to demand yet and continue to add capacity for the AirPods", Mr Maestri said. Of course, the iPhone still pulled down almost $30 billion in total revenue, but Services has rapidly grown from a minor segment of Apple's business to a major component. Mac sales were down 13 percent and iPad sales rose, but only just; 11.55 million units were sold compared to 11.42 million units a year ago. They expected revenue of $52.34 billion.

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