Apple needed a breakout quarter after its last whiff, and boy did it get one.
The company reported revenue of $42.4 billion and earnings of $1.42 per share. Analysts were expecting earnings of $1.38 per share on revenue of $42.09 billion. As a result the company added tens of billions of value back to its share price, which rose 5% in extended trading.
That’s still a down quarter from last year. Apple then reported revenue of $49.6 billion on earnings of $1.85 per share. But that’s to be expected as the company’s core growth engine — the iPhone — has started to reach a saturation point and slow.
Last quarter was a pivotal moment for Apple. The company showed its first revenue decline in 13 years, missing analyst expectations by a mile. iPhone sales, Apple’s main growth driver, were significantly down from the second quarter a year earlier. That sparked a lot of concern that Apple’s core engine may have — actually, most likely — has hit a saturation point.
As a result of that report, Apple’s stock promptly fell off a cliff. $40 billion in value for the company was wiped out in a single afternoon. Google continued to creep up on Apple, and at some moments seemed likely that it would permanently overtake the position of the most valuable company in the world (as it did at one point, momentarily). Apple’s stock has really yet to recover from that fall.
This is also the first full quarter that the company’s revamp of the 4-inch iPhone, the cheaper iPhone SE, was for sale. That gave consumers an option to buy a less expensive phone from Apple, and upgrade from their iPhone 5 or 5S for those looking for a smaller phone. But having a cheaper phone has the potential to cut into Apple’s margins on its more expensive, more premium devices.
And so we turn to the company’s hopes and dreams. One particular note of interest was an interest in Apple’s iPad numbers this quarter. Last quarter, Apple CEO Tim Cook put out some tea leaves for investors to read that implied some optimism about the iPad. At the end of the March quarter, Apple sold around 10.2 million iPads. Here are his remarks from the last earnings report:
“We also unveiled the stunning 9.7-inch iPad Pro with cutting-edge performance and our most advanced display yet,” Cook said on the last earnings call. “The reviews of our new iPad Pros have been great, and we’re hearing from customers that the features and capabilities in the new Pros make them both the ultimate upgrade for iPad owners and a great PC replacement. In the June quarter, we expect to see our best iPad revenue compare in over 2 years.”
Analysts were expecting iPad sales of 9.1 million units. It turns out that it got more than what people were looking for — reporting that it sold 10 million iPads.
All eyes will, as such, be on Q4 and the unveiling of the iPhone 7. Apple’s last blowout performance came with the launch of the iPhone 6, which finally introduced a line of larger iPhones that proved to have extensive demand. It’s on Apple to find a way to re-ignite its core growth engine with the rest of its divisions being relatively ho-hum.
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