Brief:

• Apple reported record sales for its fiscal third quarter — usually the company's weakest time of year — due to higher iPhone prices and its growing services business. The company's profit jumped 32% to $11.5 billion on revenue that increased 17% to $53.3 billion, beating estimates tallied by Reuters. 
• Apple's iPhone sales rose 1% to 41.3 million units, but the average selling price of $724 was $30 more than analysts had estimated. That higher price point meant that iPhone revenue jumped 20% to $29.9 billion. Revenue from the company's services, which include the App Store, Apple Music, Apple Pay and iCloud storage, rose 31% to $9.6 billion and included $236 million in connection with the settlement of various lawsuits. "Apple Pay had well over 1 billion transactions last quarter, triple the amount from just a year ago," said CEO Tim Cook.
• Apple forecast that iPhone sales will stay strong in the current quarter with total revenue growing an estimated 14% to 16% to $60 billion to $62 billion. Apple is expected to release three new devices next month, including an update to the iPhone X ($999), an oversize phone with an OLED display ($1099) and a smaller LCD model ($699), according to analysts at UBS.

Insight:

Apple’s results show that the company is coping with slower growth in unit sales of the iPhone, its biggest revenue-generator, with higher price points and a greater emphasis on its services business. Apple CEO Tim Cook last year set a goal to double company's services revenue to $50 billion a year by 2020. This quarter's results show the company is on its way to easily reaching that target. The company now has more than 300 million subscriptions to various services, a figure that includes Apple's services and third-party apps like Netflix that pay Apple a cut of revenue when it handles billing.

Apple Music has more than 50 million users, including those on free trials, while the company also is investing in original video, such as dramatic series with Hollywood stars Reese Witherspoon and Jennifer Aniston. The company hasn't announced how much it will charge for its original programming or how it will distribute the shows. Apple also said that Apple Pay will be available at CVS and 7-Eleven stores, and will soon be introduced in Germany, per CNet.

As Apple prepares to announce its next line of iPhones, the company will have to prepare for consumer sensitivity to higher smartphone prices. That means the newer phones need to have innovative features to urge people to shell out $1,000 or more. Samsung Electronics, which is the world's biggest seller of smartphones, raised prices to about $1,000 but this week reported a decline in mobile-phone profits. Samsung acknowledged that it was too cautious in adding innovative features to its smartphones, while it faces growing competition from less expensive Chinese phone makers that are targeting budget-conscious mobile users, per The Wall Street Journal. Disappointing sales of its flagship Galaxy S9 smartphone spurred executives to pursue plans to introduce a foldable-screen phone by early next year.