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Wednesday, February 1, 2017
 Latest iPhones Fueled Apple's Record First Quarter Results
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Apple reported high quarterly revenue fueled by demand for the company's latest and priciest iPhones.



During the fiscal 2017 first quarter ended December 31, 2016, the company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. These results compare to revenue of $75.9 billion and earnings per diluted share of $3.28 in the year-ago quarter. International sales accounted for 64 percent of the quarter's revenue.

"We're thrilled to report that our holiday quarter results generated Apple's highest quarterly revenue ever, and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch," said Tim Cook, Apple's CEO. "Revenue from Services grew strongly over last year, led by record customer activity on the App Store, and we are very excited about the products in our pipeline."

Introduced in September, the iPhone 7 represented a modest update to its predecessor, the 6S, adding water resistance, an improved camera, battery life and processor while retaining similar styling. Expectations are mounting for a more significant upgrade to Apple's flagship product later this year, which is the 10th anniversary of the iPhone's launch.

Apple said it sold 78.3 million iPhones in the final quarter of 2016, generating $54.4 billion in revenue in the period. The average sales price for each iPhone was $695, compared with $691 a year earlier.

"The iPhone 7 is our most popular model," Chief Executive Officer Tim Cook said in a conference call with analysts. "We saw especially strong demand for iPhone 7 Plus, which was a higher portion of the new product mix than we've ever seen with Plus models in the past."

In addition to churning out new handsets, Apple tried to drive adoption of services such as Apple Music, iCloud and the App Store. Services revenue again represented the fastest growing segment, with sales jumping 18 percent to $7.2 billion in the holiday quarter.

Sales in China fell 12 percent to $16.2 billion, the only region to see a decline. Apple said it generated 64 percent of its revenue overseas in the holiday quarter.

IPad sales continued their slide, declining 22 percent from a year earlier to $5.5 billion. Mac revenue increased 7 percent to $7.2 billion.

Cook has also discussed the potential of augmented reality and the possibility of major acquisitions to expand. Apple is working on digital glasses that may use augmented reality, people familiar with the matter said in November.

Commenting on the recent legal battles with Qualcomm, Cook said that he views litigation as a "last resort" but that Apple "didn't see another way forward."

"You should take from our filing that we viewed it as, we didn't see another way forward," Cook said in response to an analyst's question about the high-profile lawsuit. "[Qualcomm was] insisting on charging royalties for technologies that they had nothing to do with," he said, claiming that as Apple innovated with new features like its TouchID fingerprint sensors or advanced displays and cameras, Qualcomm would collect money "for no reason."

Apple filed a $1 billion lawsuit against Qualcomm earlier this month, saying that Qualcomm has been overcharging the consumer tech company for usage of basic patents. Apple's suit came on the heels of the US Federal Trade Commission filing an anti-trust suit against the chip maker for the same alleged practices.

Apple also provided the following guidance for its fiscal 2017 second quarter:

  • revenue between $51.5 billion and $53.5 billion
  • gross margin between 38 percent and 39 percent
  • operating expenses between $6.5 billion and $6.6 billion
  • other income/(expense) of $400 million
  • tax rate of 26 percent

Leader in global smarphone market

In related news, Apple emerged as the leader in the global smartphone market in the fourth quarter of last year, beating its South Korean archrival Samsung Electronics.

The U.S. giant sold about 78.3 million smartphones during the October-December period, up 18 percent from a year earlier, the data compiled by industry tracker Strategy Analytics showed. The figure translates into a market share of 17.8 percent.

Samsung shipped 77.5 million units during the cited period, down 5 percent from a year earlier, taking up 17.17 percent of the market.

Strategy Analytics said Apple overtook Samsung as the South Korean tech firm has been grappling with the recent recall of its flagship Galaxy Note 7 over faulty batteries.

For all of 2016, however, Samsung maintained its global leader position with 22.2 percent market share by shipping 309.4 million smartphones, followed by runner-up Apple with 16.1 percent, the data showed.

Three Chinese vendors -- Huawei Technologies Co., Oppo and Vivo -- followed Apple and Samsung in the top five, with Huawei leading the pack with a 10 percent market share during the same period, the data showed. It marks the first time that Huawei has posted double digit market share.

Strategy Analytics also said the annual global smartphone shipments hit an all-time high of 1.49 billion units in 2016.

 
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