Apple released strong quarterly results on Tuesday, sending its shares up 6% in after-hours trading to a record high. Here are some of the key reasons why the company’s stock is soaring.
Sunny forecast:
Apple forecast revenue for the current quarter, ending in September, of $49 billion to $52 billion, exceeding the $49 billion that analysts were expecting. Generally, new iPhones go on sale in late September, so the higher-than-expected forecast from Apple likely indicates that Apple is bullish about its upcoming smartphone line, which is widely rumored to include a more expensive “Pro” model. When analysts asked CEO Tim Cook about the forecast, however, he said the company doesn’t comment on “anything that’s not announced.”
Return of the iPad:
IPad sales finally got back on track after Apple released a number of new models, including a 10.5-inch iPad Pro and a new, cheaper iPad starting at only $329. The number of iPads sold during the quarter rose 15% to 11.4 million, the first increase after more than three years of shrinking sales. Revenue from iPads increased only 2%, indicating that much of the gain was with cheaper models. CEO Cook also said that iPad sales to schools, which tend to buy cheaper models, jumped 32%.
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Apple at your service:
Apple’s service revenue, which includes everything from the sale of digital music tracks and movies to online storage, jumped 22% to $7.3 billion. That’s a faster growth rate than Apple has seen in some recent quarters. Apple CFO Luca Maestri said Apple has made it easier for people in some countries outside of the United States to pay for apps, which helped drive some of the growth. For example, Apple last fall added Alipay as an option for Chinese customers, Maestri said.
Mac attack:
Apple (AAPL) sold 1% more Mac computers than it did a year earlier, even as the overall PC market shrunk about 4%. More expensive models likely sold well because revenue rose even faster, increasing 7%.
Reading China’s tea leaves:
Everything wasn’t perfect. Apple’s sales in China, once the company’s growth engine, continued to shrink, with revenue dropping 10% to $8 billion. Cook said that sales in mainland China were flat, but up 6% if the value of the dollar had stayed steady instead of shrinking—in what is a positive sign. That total excludes Hong Kong, where Apple’s sales have been plunging. But Cook thinks Apple is “sort of at the trough of that,” meaning he thinks that sales in China may not decline much more. So that could also be a positive sign for future quarters.