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Apple narrowly beats revenue expectations in the third quarter

Apple narrowly beats revenue expectations in the third quarter


It all comes back to the iPhone

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Apple just reported earnings for its third quarter of 2016, and managed to beat Wall Street expectations — although expectations were set fairly low after disappointing earnings last quarter.

Apple reported $42.4 billion in quarterly revenue for its third quarter 2016, and quarterly net income of $7.8 billion ($1.42 per share). That compares to $49.61 billion for this time last year; and a quarterly net income of $10.7 billion in the same quarter last year. Analysts surveyed by Thomson Reuters expected $1.38 per share on $42.11 billion in revenue.

In terms of iPhone sales in the third quarter, it was another relatively weak quarter for the device, although again, Apple managed to beat short-term expectations. Apple sold 40.4 million iPhones in the fiscal quarter ending June 25th, less than the 47.5 million sold in the same quarter a year ago but beating some analyst expectations of around 40 million iPhone sales.

Apple sold 40.4 million iPhones this quarter — less than a year ago, but still beating expectations

Same with iPads: Apple sold 10 million of them, down nearly 9 percent from the same quarter last year, but managed to beat Wall Street expectations and revenue on iPads is up 7 percent. Some investors seemed to like the news, as Apple's stock jumped up after today's earnings release.

There was at least one other bright spot in the earnings: Apple says its App Store revenue was its highest ever, and its services business grew 19 percent year over year. As we noted last quarter, Apple has also started to emphasize its cloud services, not necessarily devices, as a key revenue generator for the company, as it tries to wring more profits from existing device users.

Apple's quarterly earnings report prior to this one was a particularly rough one, during which the company saw its year-over-year revenue decline for the first time in 13 years. Much of that was attributed to a slowdown in iPhone sales and the fact that Apple hasn't release a must-have new product in awhile. Because of last quarter, expectations were set very low for this one: Apple at the time projected another revenue decline for the third quarter, a 15 percent year-over-year drop.

For the fourth quarter of this year, Apple is projecting revenue between $45.5 billion and $47.5 billion — higher revenue than the current quarter, but still less than it earned a year ago during the same quarter ($51.5 billion).