Apple Inc. (AAPL, Financial), one of the world’s largest consumer electronics manufacturers, said fiscal third-quarter revenues increased 7% year over year, the “third consecutive quarter of accelerating growth” according to CEO Tim Cook.
The Cupertino, California-based company reported $45.4 billion in revenue during the quarter ending June 30, up $3 billion from fiscal third-quarter 2016. Diluted net earnings of $1.67 climbed approximately 25 cents from the prior-year quarter.
Net revenues increased year over year as company accelerates service revenues
The company reported a 22% year-over-year increase in services, driven by strong growth around the world in all service-related components, including digital content, AppleCare and Apple Pay. Cook mentioned in the earnings call that service revenues reached an all-time record of $7.3 billion during the quarter. The services division, according to Cook, would be the size of a Fortune 100 company, a “milestone” company management reached earlier than expected.
Chief financial officer Luca Maestri said Apple’s App Store is the “preferred destination” for customers to make purchases. App Store revenues were approximately twice that of Alphabet Inc. (GOOGL, Financial)’s Google Play revenues. Paid subscriptions for Apple Music and iCloud Services increased by 20 million over the past 90 days, exceeding 185 million customers for the quarter.
Company provides strong net revenue outlook for the fiscal fourth quarter
While the company’s net revenues declined 14% from the prior quarter, Apple expects fiscal fourth-quarter net revenues of $49 billion to $52 billion. Cook mentioned several company updates in the June Worldwide Developers Conference, including the announcement of “advances in iOS, macOS, watchOS and tvOS.” One major development is the iOS 11, which will “make iPhones better and take the iPad experience further” according to the CEO.
Apple’s margins and returns continue to outperform over 97% of global consumer electronics companies, suggesting strong growth potential compared to peers.
As the company exceeded its earnings expectations, Apple traded at $150 per share after the earnings release, up $1.32 or about 0.89% from the previous close price. The company’s share price remains significantly overvalued with a price-book ratio of 5.82 and a price-sales ratio of 3.64. The latter is near a three-year high of 3.99.
Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio) owns over 129 million shares of Apple as of June 30.
Disclosure: The author has no positions in the stocks mentioned.
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