Apple sells more iPhones than expected, shares jump after hours

Wed Jul 27, 2016 1:18am EDT
 
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By Julia Love and Anya George Tharakan

(Reuters) - Apple Inc AAPL.O sold more iPhones than Wall Street expected in the third quarter and estimated its revenue in the current period would top many analysts' targets, soothing fears that demand for the company's most important product had hit a wall.

Its shares rose 7 percent in after-hours trading.

The world's most valuable publicly traded company said it sold 40.4 million iPhones in the third quarter, down 15 percent from the year-ago quarter but slightly more than the average analyst forecast of 40.02 million, according to research firm FactSet StreetAccount.

IPhone sales dropped for the second straight quarter, pushing down Apple's total revenue 14.6 percent in the fiscal third quarter, ended June 25.

Demand for Apple's phones has waned in China, partly because of economic uncertainty there, and has also slowed in more mature markets as people tend to hold on to their phones for longer. The sales slump has stoked concerns about whether the tech leader can continue to deliver profits at the level Wall Street has come to expect.

"China was a major letdown," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "Samsung and Huawei are much more competitive now than a year ago and the Chinese economy is not doing well at all."

Moorhead said, however, that increased services revenue - which includes the App Store and iCloud - was a "very big bright spot for Apple."

Chief Financial Officer Luca Maestri told Reuters in an interview that Apple's performance had topped his expectations in a quarter weighed down by tough foreign exchange rates and difficult comparisons with blockbuster iPhone 6 sales from the previous year.   Continued...

 
A woman uses a phone outside an Apple store in Beijing, China, July 27, 2016. REUTERS/Thomas Peter