Apple shares rose 2.4% Thursday in after-hours trading following its earnings release for the third quarter ended in June.
The Cupertino-based iPhone maker reported June quarter record revenue of $53.3 billion, a 17% increase from the same quarter a year earlier. The results beat Reuters analyst forecast of $52.29 billion. Earnings per share were a June quarter record of $2.34, an increase of 40%, versus analyst estimates of $2.18.
CEO Tim Book ascribed the forecast-beating results to strong sales of iPhone, services and wearables. The company also recorded sales growth across its geographic segments. Apple saw double-digit revenue growth in each segment except Japan, where it grew 7%.
Apple’s shares have gained 10% year to date, placing the stock as the second weakest among its FAANG peers. It has beat only Facebook (FB, Financial), whose shares have declined 5% due to forecasts below analyst estimates for the third quarter.
The company is also flat for the week so far, while each of its FAANG cousins has declined in a rout in the tech sector.
“In a nutshell, after the heartburn seen from the earnings disappointments across tech bellwethers such as Facebook and Netflix over the last few weeks, Apple gave the Street and tech investors finally some good news with a clean June headline beat and stronger than expected outlook for the September quarter which is a positive data point for the iPhone product cycle demand heading into FY19,” said Daniel Ives, head of technology research at GBH Insights.
iPhone sales helped boost Apple’s results. The company sold 41,300 units, a 1% rise from the year earlier, while revenue for the phone soared 20%. The average selling price was $724 for the iPhone versus the Street estimate of $693. On the conference call, Cook noted that iPhone 10 was the most popular iPhone, with a customer satisfaction score of 98%. iPhone sales grew faster than the global smartphone market, he said.
Its increasingly important services segment, which includes digital content, AppleCare and Apple Pay, reported 31% growth year over year to $9.55 billion in sales. Apple music grew 50%, and Apple care revenue grew at the highest rate in 18 quarters. Cloud services revenue grew 50% as Apple clocked 1 billion transactions, tripling from one year ago.
More companies will begin accepting Apple Pay, the company’s mobile payment app, in the fall, including CVS, 7-11 and eBay (EBAY, Financial). According to Cook, the company is on track to reach its target of doubling fiscal 2015 services revenue by 2020 or “maybe even doing a little better.”
“We’re working with key partners in the enterprise to change the way work gets done with iOS and Mac,” Cook said.
“We’re expanding our reach into emerging markets and seeing strong double digit growth in revenue and making great progress toward significantly expanding our services business,” he added.
The market bid up the company’s shares as the conference call progressed. It had gained 3.78% in after-hours trading by 4:24 p.m. to $197.70 per share.
Among those cheering the results is Warren Buffett (Trades, Portfolio), who has Apple as his top holding at Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial). David Rolfe (Trades, Portfolio), Lou Simpson (Trades, Portfolio) and Ronald Muhlenkamp (Trades, Portfolio) have the next largest allocations to the stock.
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