Apple bullish on strength in iPhone, iPad and App Store

Brief:

Apple sold 41 million iPhones in the quarter ended July 1, compared with 40.4 million a year earlier. The biggest surprise was the gain in iPad sales, which had suffered as people gravitated toward iPhones with bigger screens. Tablet unit sales grew 15% from a year earlier to 11.4 million, with half of those going to first-time buyers, the company said.
Apple also had a strong quarter for its Services category, with App Store, Apple Music and iCould services all experiencing revenue growth. Overall, revenue for the services category grew 22% year-over-year for a total of $7.3 billion, an all-time high.
Apple's strong quarterly results was well received by the market, with its stock rising 6% in after-hours trading to reach an all-time high, according to Reuters.

Insight:

Coming off a strong fiscal Q3, Apple appears very confident in the prospects for its next iPhone, which will mark the 10th anniversary for the iconic product that led to a massive transformation in the way people interact and consume media. The top-end iPhone is expected to include an organic light-emitting diode screen that has a sharper picture and a front-facing 3-D sensor for facial recognition. The next iOS upgrade will have more advanced augmented reality features, peer-to-peer payments in Apple Pay, better maps and an improved version of intelligent assistant Siri.

Apple raised its sales forecast for the current quarter, likely indicating that it expects the next iPhone is going to be a strong seller for the Cupertino, CA, company. Revenue are forecast to be $49 billion to $52 billion in the three months through September, when new iPhones usually go on sale. Analysts estimated sales of only $49.1 billion on the possibility that the iPhone would be delayed, Bloomberg News reported.

Apple CEO Tim Cook declined to comment on the next generation on iPhones during a conference call with analysts to discuss fiscal Q3 results.

Apple is trying to diversity beyond the iPhone, which is responsible for two-thirds of the company’s sales, especially as competitors introduce lower-priced phones with similar features. Research and development spending climbed 15% to $2.9 billion in Q3 from a year earlier as Apple invests in developing its HomePod smart speaker, smart glasses, an autonomous driving system, better health features and its own chip technology.

The HomePod goes on sale in December as Apple responds to Amazon’s Echo and Alphabet’s Google Home speakers. The device will be priced at $349, almost three times as much as the Google Home, but Apple says the HomePod will have more advanced sound technology. The speaker will give the company a stronger advantage for its Apple Music streaming music service as competitors like Spotify continue to add paid subscribers. Apple’s services business, which includes music streaming and the iCloud storage service, saw sales rise 22% to $7.3 billion in the quarter from a year earlier.