Even though Apple’s long run of higher and higher sales every quarter has ended for a while, it does appear that Wall Street isn’t near as bearish about the company’s prospects as one might have expected. Now I don’t presume to understand how the market works, for I might well be a rich man today. Clearly there’s optimism about Apple’s long-term prospects, that the company isn’t on the ropes, and that there’s no prospect of red ink on the horizon.<\/p>\n
That doesn’t mean expectations for the last quarter were\u00a0high. They couldn’t be in light of Apple’s guidance. Indeed, the company’s financials for the June quarter actually exceeded most expectations.\u00a0That alone was a decent achievement overall, even if some might have hoped\u00a0for better sales numbers. Total revenue came in at\u00a0$42.4 billion, with a quarterly net income of $7.8 billion. The Wall Street consensus pointed to\u00a0revenues of $42.2 billion.<\/p>\n
In all, a total of 40.4 million iPhones were sold. In the year-ago quarter,\u00a0Apple sold 47.5 million iPhones with revenue coming in at $49.6 billion. So the decrease seems like an awful lot, but Apple is still moving more high-end smartphones than anyone else, and that includes Samsung. Unfortunately, the facts about Samsung are often obscured. They may sell more handsets overall, but most are in the lower price categories. To be sure, the flagship Galaxy S7 lineup had to be\u00a0discounted when it first came out, which is hardly a show of confidence.<\/p>\n
On the positive side of the ledger, maybe\u00a0the iPad may be coming out of its slump, however. While sales of less than 10 million units were 7 percent lower than in the year-ago quarter, the results were\u00a0still a million more units than Wall Street estimated. Total revenue increased 9 percent, which reflects the higher average sales price due to the success of the iPad Pro. This increase is the best in the last 10 quarters, so maybe there’s a reason for renewed optimism for the iPad’s success.<\/p>\n
Unfortunately, it appears that the estimates of lower Mac sales from Gartner and IDC were pointed in the correct direction. Apple sold 4.3 million Macs, a decrease of 11% from the year-ago quarter. This continues a\u00a0downward trend that is actually slightly worse than the rest of the PC industry. While you can speculate that sales might have been higher had Apple produced some compelling hardware refreshes this year, the problem may actually stem from the fact that older Macs still work quite well, that improvements have been very slight from year to year. Since macOS Sierra will support all Macs from 2010 onwards, and a couple of\u00a0models from 2009, that leaves millions of Macs with a relatively long useful life.<\/p>\n
On the positive side, the iPhone SE, the smallest iPhone, remains backordered as Apple continues to add production capacity. Apple’s growing services business grew 19% year-over-year, and App Store revenues reportedly hit a\u00a0record. Apple continues to improve its ability to earn more money from existing customers, so even if hardware sales\u00a0remain flat or lower for a while, other sources if income will help, in part, to compensate.<\/p>\n
There’s not much to say about the Apple Watch. Again, actual sales are buried in an “Other Products” category, and can only be guessed at. It remains the most popular smartwatch, although independent estimates say that other companies are catching up.<\/p>\n
In any case, Apple issued its usual conservative guidance for the current quarter, with revenue estimated at between $45.5 billion and $47.5 billion, with gross margins between 37.5% and 38%. These numbers are slightly above analyst projections that averaged $45.6 billion.<\/p>\n
Clearly Wall Street noticed, as stock prices soared by some 6.5% in after-hours trading. After so many quarters where\u00a0Apple’s share price routinely dropped after quarterly financials were announced, this demonstrates a surprising amount of optimism for Apple’s long-term prospects.<\/p>\n