Apple Projects Revenue That Tops Estimates on New iPhone Models

(Bloomberg) -- Apple Inc. projected revenue in the current quarter that topped analysts’ estimates, signaling the company is optimistic about potential sales of the new iPhone models set to launch late in the period.

Fiscal fourth-quarter sales will be $61 billion to $64 billion, the Cupertino, California-based company said Tuesday in a statement. Analysts, on average, estimated $61 billion, according to data compiled by Bloomberg. Apple’s projection at the high end is a 1.7% increase from the period a year earlier.

The forecast suggests the company anticipates that its next iPhone lineup, which won’t be a major change from the 2017 and 2018 models, and increasing revenue from services will be strong enough to return the company to growth. Apple typically puts its new iPhones on sale toward the end of the fourth quarter.

“Investor expectations were pretty low going into the quarter, and the numbers beat in many segments, and the guidance was strong,” said Shannon Cross of Cross Research. “We’re seeing indication of strong product refreshes and launches as we move in to the fall and optimism around China.”

Apple reported that sales in the period ended June 29 gained 1% to $53.8 billion from a year earlier, beating analysts’ estimates of $53.4 billion.

“This was our biggest June quarter ever -- driven by all-time record revenue from Services, accelerating growth from Wearables, strong performance from iPad and Mac and significant improvement in iPhone trends,” Chief Executive Officer Tim Cook said in the statement.

Shares jumped about 4% in extended trading after closing at $208.78 Tuesday in New York. The stock has gained 32% this year.

Net income was $10 billion, or $2.18 a share, in the fiscal third quarter, compared with $11.5 billion, or $2.34 a share, a year earlier. Analysts estimated $2.10 a share.

Apple is struggling with stagnant smartphone demand as people take longer to replace their gadgets and Chinese rivals like Huawei Technologies Co. grab market share. The trade war is also denting Chinese economic growth while souring consumers there on American brands.

The Cupertino, California-based company made a concerted effort in the first three months of the year to revive disappointing iPhone sales, resorting to discounts, generous trade-in offers and new financing options to lure buyers. Those measures continued the past quarter.

Despite holding a glitzy launch event in March previewing four major new services, the company has only managed to roll out one so far, Apple News+, which has not been as successful as the company projected. Cook confirmed on a conference call that a branded credit card will launch in August, as Bloomberg News had reported. Cook also said that thousands of Apple employees have been testing the Apple Card, which is a partnership with Goldman Sachs Group Inc. Those services still mostly require the iPhone.

Services revenue reached $11.5 billion in the period, a quarterly record, but short of analysts’ estimates of about $11.9 billion.

The company earlier this year stopped announcing unit sales for iPhones, Macs, and iPads, but still reports revenue for those devices.

• IPhone revenue was about $26 billion in the quarter, falling short of analyst projections of $26.5 billion. That’s a strong year-over-year decline from last year’s $29.5 billion.
• IPads generated sales of $5.02 billion, meeting projections of $5 billion from analysts.
• Mac revenue was $5.82 billion, topping estimates of $5.4 billion and an increase from last year’s $5.3 billion.
• The company said it had $5.52 billion in wearables revenue, its category for the Apple Watch, and AirPods and Beats headphones. That’s an increase from $3.7 billion a year ago and topped analyst projections of $4.85 billion.

To contact the reporter on this story: Mark Gurman in San Francisco at mgurman1@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Andrew Pollack, Molly Schuetz

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