Shares of Apple (NASDAQ:AAPL) surged more than 6.5 percent in after-hours trading on Tuesday, after the tech giant posted quarterly earnings and revenue figures that exceeded analysts’ estimates.
Moreover, the company managed to deliver 40.4 million iPhones, beating consensus forecasts by 400,000 units.
"It's clear the introduction of the $399 iPhone SE has buoyed iPhone sales, and it's a good option for students or anyone who wants to be in the iPhone app-ecosystem without paying a high premium," an analyst stated. "The question is where Apple goes from here to get upgraders and Android switchers excited about phones again. Some say there's no room left to innovate in this oversaturated market, and the iPhone 7 needs to prove the doubters wrong."
On the other hand, revenue slipped more than 18 percent to $40.4 billion from $49.6 billion in the same quarter last year, while earnings per share fell 23 percent to $1.42 from $1.85 in the previous year.
Both results beat analysts’ forecasts, which called for Apple to release earnings per share of $1.38 on revenue of $42.09 billion. Looking at the report, the company’s stock declined more than 22 percent over the past year and was down 8 percent this year. Therefore, Tuesday’s earnings report was a breath of fresh air for shareholders.
Market players praised the classic bullish ‘beat and rise’ plot, as the leading tech company provides guidance for the fiscal fourth quarter between $45.5 billion and $47.5 billion. The average estimate of $46.5 billion is higher than the $45.7 billion predicted by analysts.
On a year-over-year basis, iPhone revenue plunged 23 percent, while Mac revenue lost 13 percent. Meanwhile, iPad rose 7 percent and services revenue increased 9 percent.
Apple’s Decline In China
Revenue also dropped in all five geographic categories reported by the company. The Americas were down 11 percent, while Europe declined 7 percent. On the other hand, the most significant slump came from Greater China, where revenue plummeted 33 percent from the past year.
China’s Apple growth performance disappoints. Back in April, a well-known investor sold his entire multibillion-dollar position in the company, noting concerns that the Chinese government exerted too much power and could make it hard to operate business in the country.
Peripheral products and services such as the Apple Watch and Apple Pay haven’t been beneficial either, passing the burden on the iPhone to bear the weight of the traditional Apple cart. The Apple Watch hasn’t even been known enough to be broken out into its own reporting category, and is still faltered with the vanilla ‘other products’ sectors.
The sales performance of the Apple Watch, which was the first new product line from Apple since the death of Steve Jobs, has been equitably disappointing. The wearable fitness device has several different pricing categories, which seems too expensive for most buyers.
Nearly 57 percent of Apple’s revenue still comes from the iPhone, which is likely to remain the key revenue driver until the company can develop another amazing product or service.
Luckily, the iPhone isn’t diving as fast as most anticipated. Therefore, the core smartphone and tablet business may be sufficient to sustain Apple shares.
At the current rate that Apple is going, analysts predict that the stock may climb up to 8 percent in the following session.