Apple beats Q3 expectations, posts solid Q4 outlook
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."
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.