- Apple reported fiscal second-quarter results Tuesday that beat Wall Street’s forecasts.
- Although its sales and earnings were below those it posted in its second quarter last year, they were better than analysts were expecting.
- The company’s shares were up 6% in after-hours trading following its report.
- Watch Apple trade live.
Investors cheered Tuesday after Apple’s latest quarterly results surpassed the low bar Wall Street had set.
The tech giant’s fiscal second-quarter revenue – including that from its all-important iPhone line – fell from the same period a year earlier, as did its earnings. But the results topped analysts’ muted expectations. The company also forecast that its third-quarter sales would be higher than Wall Street was predicting.
The company’s better-than-expected report immediately resulted in a booming stock price. In recent after hours trading, Apple’s stock was up $US9.09 – or 5% – to $US209.76. Earlier in the session, the company’s shares were up as much as 6%.
Here’s what Apple reported, and how its results compared with Wall Street’s expectations and its year-prior numbers:
- Fiscal second-quarter revenue: $US58 billion. Analysts had projected $US57.5 billion. In the same period last year, Apple posted revenue of $US61.1 billion.
- Q2 iPhone sales: $US31.1 billion. Wall Street was looking for $US30.5 billion. The company recorded $US37.6 billion in iPhone sales in 2018’s second quarter.
- Q2 services sales: $US11.5 billion. Analysts had forecast $US11.2 billion. Apple’s services business brought in $US9.9 billion in revenue in the same period a year ago.
- Q2 earnings per share (EPS): $US2.46. Wall Street was looking for $US2.37. The iPhone maker earned $US2.73 a share in its second quarter last year.
- Fiscal third-quarter revenue: $US52.5 billion to $US54.5 billion. Wall Street had previously predicted $US52.2 billion in sales. Apple saw sales of $US53.3 billion in the same period of 2018.
- Q3 EPS: The company didn’t offer specific earnings guidance, but its outlook for the period implies that it expects to post earnings ranging from $US1.93 to $US2.18 a share. Analysts had previously forecast $US2.08 a share. The company posted a per-share profit of $US2.34 in last year’s third quarter.
Apple offered a mixed story on services
Wall Street reset its projections for Apple after it warned in January that it saw worse-than-expected iPhone sales over the holidays, and expected continued struggles in coming months. The warning followed numerous reports and indications that its latest models weren’t catching on with consumers to the same extent that previous models had. With Apple unlikely to refresh its lineup until this fall, analysts are projecting its sales won’t rebound anytime soon.
Even if analysts and investors had largely written off this overall report already, many have been anticipating the results of Apple’s services business. As its iPhone sales have slowed, the company has increasingly been touting the growth of that segment, which includes everything from its Apple Music subscription service to its iCloud storage business to the money it gets from Google for promoting Google’s search engine. Last month, Apple unveiled new subscription-based services for news, games, and videos, although only the news service has launched so far.
The company offered a somewhat mixed bag on the services front for the second quarter. Sales topped analysts’ estimates and Apple recorded record revenue in several services categories, CEO Tim Cook said on a conference call with analysts. But overall services revenue grew 16% from the same period a year earlier, which represented a slowdown from the 19% annual pace Apple recorded in the first quarter. What’s more, the $US1.6 billion increases in services revenue made up for less than a quarter of Apple’s $US6.5 billion decline in iPhone sales.
China continues to weigh Apple down
In addition to the drop in its smartphone revenue, Apple’s second-quarter results were weighed down by its continued struggles in China. It posted sales of $US10.2 billion in its greater China region, which includes Taiwan and Hong Kong. That amount was down 22% from the same period a year earlier.
But that decline actually represented a relative improvement from the holiday quarter, when Apple’s sales in China slumped by 27% on an annual basis. The company has benefitted from cutting its prices there, offering better deals to customers who are trading in old iPhones for new ones, and from a government stimulus program, Cook said.
In terms of Apple’s iPhone sales slump in China, the holiday period “appears to be the trough,” Cook said. He continued: “We certainly feel a lot better than we did 90 days ago.”
But Apple saw weak sales in other areas as well. Its revenue in Europe fell 6% from the second quarter last year, while its sales in Asian regions outside of Japan and China dropped 9%. While the company posted positive growth in the Americas and Japan it was fairly anemic in both places, growing 3% annually in the former and just 1% in the latter.
Apple’s overseas results were depressed by a strengthening US dollar, Luca Maestri, Apple’s chief financial officer, said on the call. When the value of the US currency increases compared to foreign equivalents, sales made in those overseas currencies can be exchanged for fewer dollars.
The new AirPods are a hit
The company’s results were mixed when divvied up among its various product lines. In addition to the 17% year-over-year drop in its iPhone sales, Apple also saw a 5% decline in revenue from its Mac computers. Cook blamed that falloff in a shortage of processor chips.
“We believe Mac revenue would have been up without those constraints,” he said on the call.
On the positive side, sales of Apple’s wearables, home, and accessory products jumped 30% from the same period last year. Revenue in that category was boosted by a nearly 50% jump in sales of its wearables devices, which are basically comprised of Apple Watch and the AirPods headphones, Cook said. Consumer interest in Apple’s new AirPods, which it introduced last month, is “off the charts,” he said.
Apple’s stock closed regular trading Tuesday off $US3.94 a share, or 2%, to $US200.67.
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