Apple revenues continue to slow, but it pins its hopes on iPhone 7 and services

Apple's claims demand for iPhone 7 'outstrips supply'

Apple today (October 25) posted quarterly revenues of $46.9bn for the three-months to September 24 and quarterly net income of $9bn, both these figures down from $51.5bn and $11.1bn (respectively) a year earlier. But its leadership remains bullish, telling analysts it 'sells everything it produces.'

The mixed results were based on the back of slowing sales of the iPhone 6 in anticipation of the latest updated smartphone series iPhone 7, but Apple was quick to trumpet the success of its latest model, as well as the upward trajectory of its services division.

Gross margin was down to 38% (compared to 39.9% 12 months earlier) with international sales accounting for 62% of its quarterly revenue during the period.

Apple's leadership pointed out that the decline in revenues was likely influenced by the release date of the iPhone 7 (September 16), meaning the number of days its latest flagship device was available to consumers was in the single digits during the reporting period.

Total iPhone sales numbered 45.5 million during the period, with the company also quick to highlight the iPhone 7 Plus on its subsequent analyst call.

Apple CEO Tim Cook noted that “demand continues to outstrip supply” for its latest device. Answering questions from analysts over intended upgrades to the latest device, he added: “In terms of iPhone 7 the carriers with iPhone upgrade plans, the information we have from them is that demand is very robust … but it’s different to differentiate in the early weeks.”

In addition, Apple was also quick to highlight customer reaction to Apple Watch series, but again he declined to reveal sales numbers. Although he did state that record numbers of former Android users were defecting to its iOS ecosystem.

Meanwhile, revenue from iPad sales “was flat” during the period, but the company was quick to highlight that its revenue from services (such as Apple Music and the App Store), grew 24% in September to hit $6.3bn. Additionally, it forecast this number to grow further in the subsequent quarter. Elsewhere, Apple Pay transactions were up almost 500% year-on-year, according to Cook’s statement on the company’s analyst call.

In a statement on the results, Cook, noted: “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24% to set another all-time record.”

Additionally, Apple also provided the following guidance for its fiscal 2017 first quarter:

  • Revenue between $76bn and $78bn
  • Gross margin between 38% and 38.5%
  • Operating expenses between $6.9bn and $7bn
  • Other income/(expense) of $400m
  • Tax rate of 26%

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