Watch CBSN Live

Apple turns around its iPhone sales slump

Latest MoneyWatch headlines
Latest MoneyWatch headlines 01:10

Apple (AAPL) reversed a three-quarter-long decline in iPhone sales to report record quarterly revenue Tuesday evening. Investors cheered the news, as sentiment had dimmed recently, and pushed the shares up 3.1 percent in after-hours trading.

If the gains carry into the open of cash trading on Wednesday morning, Apple’s stock will push to a new record high.

For the company’s fiscal first quarter, earnings came in at a better-than-expected $3.36 per share on revenues of $78.4 billion (beating estimates of $77 billion).

iPhone shipments were strong at 78.3 million vs. 74.8 million last year and the 77 million that analysts expected. The much derided, headphone-jack-less iPhone 7 defied its critics and returned to being Apple’s single most important business segment to year-over-year growth.

iPad shipments were weak, however, at 13.1 million vs. 16.1 million last year and 15.5 million expected. China revenue was soft as well, down to $16.2 billion vs. $18.4 billion last year. Apple’s net cash hoard also rose to a new record of $159 billion, most held offshore.


Questions continue to linger, however, over the health of the iPhone business after a number of quarters of disappointing results and a recent Japanese press report that production could be cut by 10 percent due to sluggish sales. The iPhone 7 continued with the iPhone 6 form factor that was first introduced in 2015. 

The eagerly anticipated “iPhone 8” launch, expected later this year, is widely viewed as a high-stakes update to the way Apple’s handsets look and feel.

Future success depends not only on the iPhone 8 but on Apple’s lack of contention in new areas of growth such as virtual reality/augmented reality and autonomous travel. Previous areas of innovation, such as artificial intelligence and voice recognition (via its Siri assistant) have since been pressured by competing offerings from Amazon (AMZN) and Alphabet (GOOG).

Management also issued lowered guidance, looking for fiscal second-quarter revenues of between $51.5 billion and $53.5 billion vs. the $54.05 billion analysts expected. And net income still fell by 2.6 percent from last year despite that record quarterly revenue take. The earnings per share metric got a boost from the 4.8 percent drop in the number of shares outstanding (due to stock buybacks).

So profitability remains a concern, given that’s the fourth consecutive quarter of falling net income. 

View CBS News In
CBS News App Open
Chrome Safari Continue