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Strong iPhone Sales Propel Apple Third-Quarter Profit

IPhone sales drive another quarter; no hard numbers on the Apple Watch.

Apple

Apple beat Wall Street’s profit and revenue expectations for its June quarter, thanks to strong sales of its larger-screen iPhone 6 and iPhone 6 Plus.

But that did not stop shares from falling as much as 8 percent in after-market trading after the announcement. Third-quarter iPhone shipments appeared to come in just shy of Wall Street expectations. Apple’s current-quarter revenue guidance of $49 billion to $51 billion came in at the low end of expectations of $51 billion.

The Cupertino technology giant reported record earnings of $10.7 billion, or $1.85 a share, for its fiscal third quarter, up 39 percent from a year ago, when it posted a quarterly net profit of $7.7 billion, or $1.28 per share. Revenue reached $49.6 billion, a gain of 33 percent from $37.4 billion a year earlier.

Analysts expected Apple to post earnings of $1.81 per share on revenue of $49.3 billion, according to a consensus of those surveyed by Thomson Reuters.

“We had an amazing quarter, with iPhone revenue up 59 percent over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch,” Apple Chief Executive Tim Cook said in a prepared statement.

The iPhone continued to drive Apple’s results, accounting for 63 percent of the company’s revenue. Apple shipped 47.5 million iPhones in the quarter — shy of the 49 million to 50 million range many Wall Street analysts had forecast. A year ago at this time, Apple had sold 35.2 million smartphones.

Analysts focused on the 22 percent sequential decline in iPhone sales from the March quarter to June, a more dramatic drop than Apple reported over the same period in 2014 or 2013.

Cook sought to emphasize the iPhone’s growth, particularly in greater China — where third-quarter sales increased by 112 percent compared with 2014. Indeed, the iPhone logged sales gains all over the globe, compared with the prior year. Apple also is seeing the highest rate of Android defectors that it’s ever experienced, he said, and only 27 percent of current iPhone owners have upgraded.

“From our point of view, iPhone is doing outstanding,” Cook said.

Cook said the Chinese stock market turmoil has not impacted demand in a region that accounted for nearly 27 percent of Apple’s revenue in the third quarter.

Apple offered an opaque look at the performance of the Apple Watch, its first significant new product launch since 2010. The company lumped its new device into a catchall “other” product category, which also includes the iPod, Apple TV and Beats Electronics. Sales for this group of products rose to $2.64 billion, up $952 million from the prior quarter — suggesting Apple could have sold less than $1 billion worth of smartwatches.

Cook offered analysts “color” to avoid drawing the “wrong conclusion.” He said it would be incorrect to look at the sequential change in sales of the “other” category and conclude that nearly $1 billion number represents Apple Watch sales. Rather, sales of other devices, including the iPod music player, are shrinking.

“We feel really great about how we did,” Cook said.

The iPad continued its slide. Apple shipped 10.9 million tablets in the June quarter, compared with nearly 13.3 million a year ago.

Apple’s stalwart Mac laptops and desktops continued to show momentum, with 4.8 million shipped. That’s up from a year earlier, when the company sold 4.4 million Macs.

This article originally appeared on Recode.net.

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