Apple beats Q3 expectations, posts solid Q4 outlook
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Apple reported its third quarter financial results Tuesday, beating market expectations while maintaining a healthy outlook for Q4, when the highly anticipated iPhone 8 should be released.
The Cupertino company posted diluted earnings of $1.67 a share on $45.4 billion of revenue. A year prior, it posted earnings of $1.42 a share on revenue of $42.36 billion.
Wall Street was looking for earnings of $1.57 a share on revenue of $44.89 billion.
"With revenue up 7 percent year-over-year, we're happy to report our third consecutive quarter of accelerating growth and an all-time quarterly record for Services revenue," CEO Tim Cook said in a statement. "We hosted an incredibly successful Worldwide Developers Conference in June, and we're very excited about the advances in iOS, macOS, watchOS and tvOS coming this fall."
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Apple sold 41 million iPhones in Q3, up 2 percent year-over-year. That brought in $24.8 million in revenue, up 3 percent year-over-year. Services revenue came in at $7.27 million for the quarter, up 22 percent year-over-year. Services is Apple's second-largest operating segment after the iPhone.
Apple also posted strong iPad and Mac sales: It sold 11.4 million iPads, up 15 percent year-over-year. That brought in $4.97 million in revenue, a 2 percent year-over-year increase. The company sold 4.3 million Macs, a 1 percent year-over-year increase. That accounted for $5.59 million in revenue, up 7 percent year-over-year.
While overall sales and earnings beat expectations for Q3, Apple still posted a solid outlook for Q4, potentially signaling the iPhone 8, Apple's 10th anniversary phone, should have a strong launch next quarter as expected.
Apple said it expects Q4 revenue between $49 billion and $52 billion and a gross margin between 37.5 percent and 38 percent.
Analysts said earlier than an outlook of more than $51 billion, in line with Apple's September quarter record in fiscal 2015, would be a good sign. They predicted an outlook for Q4 margins of 38 percent.
International sales accounted for 61 percent of Q3 revenue, Apple noted. Revenue was up year-over-year in every global region except Greater China, which declined by 10 percent.
Apple's revenues in the Greater China market have been trending down for a few years now, seemingly because of weak iPhone sales there. Yet Apple has far from given up on the region, continuing to invest there -- it's opening its first data center in China to comply with new cyber security laws -- and agreeing to controversial government requests, like removing VPN apps from the China App Store.