Apple sold 52.2 million iPhones in the fiscal second quarter, up 2.9 per cent from a year earlier. Analysts had projected of 52.3 million, on average, although some investors expected fewer units. The average selling price was US$728, versus analysts' expectations of US$740. That suggested the flagship iPhone X didn't perform as well as some anticipated when it launched last year.
Earlier this year, Chief Financial Officer Luca Maestri said iPhone revenue would grow by at least 10 per cent year-over-year in the fiscal second quarter. Apple easily hit that goal, with 14 per cent iPhone revenue growth in the period.
Concern about the iPhone business was fanned by suppliers that recently reported weak demand for high-end handsets, another sign the smartphone boom that made Apple the most-valuable company is ebbing.
It has also been under pressure in China, where some consumers are shunning pricey iPhones and local rivals like Oppo and Vivo are grabbing market share. Tuesday's report eased these fears, with China revenue rising 21 per cent year-over-year.
While the iPhone X is one of the top smartphones on the market, the device's US$999 starting price was too much for some consumers.
However, Apple offers an increasingly broad array of other iPhones to suit different budgets. And it's working on a new lower-cost model that has iPhone X features like 3-D facial recognition and an edge-to-edge screen.
Apple Chief Executive Officer Tim Cook highlighted strong revenue growth from iPhones, services and wearable devices like the Apple Watch. He was unconcerned about the high price of the iPhone X.
"It's priced for the value that it is, an incredible product with lots of leading edge innovations that sets us up for the next decade," Cook said in an interview. Maestri said the iPhone X was the top-selling model in the quarter.
Even as questions have swirled about iPhone demand, Apple continues to generate mountains of cash, and other businesses, such as services and wearable devices, are growing strongly.
On Tuesday, the company committed to spend an additional US$100b on share repurchases. That comes on top of an existing US$210b buyback program to be completed during the fiscal third quarter. Apple also increased its quarterly dividend to 73 cents a share from 63 cents.
Apple reported record services revenue of US$9.2b, easily beating analysts' forecasts. The App Store, Apple Music, iCloud storage and Apple Pay all generated record sales, Cook said. The company is expanding these offerings with original videos and a news subscription service. Apple has said services will be a US$50b annual business by 2021.
The CFO said Apple now has 270 million paid subscribers across applications and its own services, up by 100 million from the same period a year earlier.
The company's Other Products segment continued to see strong growth with revenue up 38 pe rcent to US$3.95b. The category includes AirPods headphones, the Apple Watch, Apple TV, and the HomePod. Cook noted that sales of wearable devices jumped almost 50 percent, year-over-year.
Apple Watch sales have been driven by strong demand for new models with cellular connectivity. Thus far, however, the HomePod has lagged rivals like Amazon.com Inc.'s Echo speakers. Apple is developing new AirPods and over-the-ear wireless headphones, Bloomberg News has reported.
Apple said it sold 9.1 million iPads in the quarter, up from the 8.9 million in the year-ago period. In March, Apple launched an updated US$329 iPad geared toward students. It's also working on an upgraded Pro model with facial recognition for later this year, which could prop up sales of the device.
While iPads dominate the tablet market, many consumers don't see the need to update these as frequently as smartphones.
Apple sold 4.1 million Macs, down from 4.2 million units sold in the year-ago quarter. Apple hasn't updated its Mac line this year, but is working on a new low-cost laptop, Bloomberg News reported earlier this year.
