Apple surpasses Wall Street expectations with 9.6pc revenue increase to $94b in Q3

WEB DESK: Apple Inc. announced its quickest quarterly revenue growth in over three years, surpassing Wall Street expectations, driven by increased demand for the iPhone and other products in China.

Revenue rose 9.6 percent to $94 billion in the fiscal third quarter, which ended June 28, the company said in a statement on Thursday. Analysts estimated $89.3 billion on average.

Apple also predicted that fourth-quarter revenue would be up by a percentage in the mid to high-single digits – better than the 3 percent that analysts had forecast.

“We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets,” Chief Executive Officer Tim Cook said on a conference call with analysts.

Though US tariffs have increased Apple’s cost of doing business, they provided a sales benefit last quarter – with consumers rushing to stores to get out ahead of expected price increases. Still, this effect only amounted to 1 percentage point of the 10-point sales gain, Cook said.

The company also has been staging a comeback in China, a market where local phone brands have made inroads with consumers. Services were another bright spot, topping Wall Street projections.

Apple shares rose about 2 percent in late trading following the announcement. They had been down 17 percent this year, putting the company well below Nvidia Corp and Microsoft Corp among the world’s most valuable businesses.

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Apple had projected a $900 million headwind from tariffs during the third quarter, saying that revenue would grow in the low to mid-single digits. Ultimately, the levies cost the company $800 million, Apple said on Thursday. It sees tariffs adding $1.1 billion in expenses during the current period.

Third-quarter earnings rose to $1.57 a share, beating the average estimate of $1.43. In China, Apple reported revenue of $15.4 billion, up 4.4 percent from a year earlier. Wall Street had been looking for sales of $15.2 billion from the crucial market.

The Cupertino, California-based company generated $44.6 billion from iPhone sales during the June quarter, topping the estimates of $40.1 billion. Beyond the tariff-spurred spending, the iPhone business got a boost in February from a new low-end model dubbed the 16e.

That device costs $599, far exceeding the price of the model it replaced, the $429 iPhone SE. Apple will announce its next iPhones in September, and the next-generation devices typically go on sale in the final weeks of the fiscal fourth quarter.

Services continue to be the company’s biggest growth driver, with sales rising 13 percent to $27.4 billion in the third quarter. Apple didn’t provide guidance for the segment when the company discussed its March results, citing uncertainty from “several factors,” but Wall Street had been looking for about $26.8 billion.

Though it has been a bright spot for Apple, the services business faces a variety of threats. Regulators around the world are proposing changes to its App Store policies, potentially reducing revenue from software and subscriptions. Separately, the US Justice Department is likely to upend an agreement with Google that makes the search engine Apple’s default option. That arrangement generates roughly $20 billion a year for the iPhone market.

Apple is also struggling to keep up with rivals in artificial intelligence. The company is even considering outsourcing its large-language models, or LLM, the technology underpinning generative AI, reported Bloomberg.

Cook has been upbeat about Apple’s progress in AI, saying the company is upping its investment in the technology.

He also said that he was open to acquisitions if they can accelerate Apple’s road map. The company has already acquired seven small companies this year, he said, while signalling that biggest deals may be possible. “We are not stuck on a certain size company, Cook said.

Apple’s Mac lineup was a highlight last quarter. The product chalked up sales of $8.05 billion, beating Wall Street expectations of $7.3 billion. The company released the new MacBook Air and Mac Studio models with faster processors in early Marach, bolstering the division.

The iPad generated $6.58 billion in revenue, down 8.1 percent from a year earlier. That missed Wall Street estimates of $7.1 billion. The company’s Wearables, Home and Accessories segment – which includes AirPods, smartwatches, TV set-top boxes, Vision Pro headsets and HomePod speakers – remain in a downward spiral. Its sales fell 8.6 percent to $7.4 billion in the quarter. Wall Street had been looking for $7.8 billion.

Apple is also planning a new Ultra watch this year with satellite connectivity, a feature aimed at hikers looking to stay in contact when away from cellular networks. And its developing new AirPods an updated Apple TV box and a smart home device with a screen and fresh operating system.

Cook was asked whether consumers might eventually switch to some kind of screen-free AI device – posing a threat to the iPhone. He said the company’s flagship product will be tough to replace.

“It is difficult to see a world where iPhone’s not living in it,” he said. “And that doesn’t mean that we are not thinking about other things as well, but I think that the devices are likely to be complementary devices, not substitution.”