It’s become a mainstay of corporate earnings seasons. Apple takes the limelight for a day to report record quarterly earnings, an extraordinary set of figures that shows its iPhone makes up nearly two-thirds of revenues, more of profits.
Its sales continue to grow in market share and even price, in extraordinary defiance of the rest of the smartphone market which is stagnating a little.
While Samsung struggles in China and even fast-growing Xiaomi loses its dominant position to Huawei as China’s smartphone market starts to slow, Apple is growing in Greater China. Its iPhone sales were up 87% there in this last quarter, the company revealed last night.
Apple does have a product that conforms to market trends, and that’s the iPad. Tablet sales are gradually decreasing globally, and true to the rest of the industry, Apple’s iPad sales slipped under the 10 million units mark for the first time since 2011 in its Q4 results. iPad revenues are down for the seventh straight quarter.
Yet none of this really matters, because inexplicably, sales of Apple’s most important product continue to defy the principle that what goes up must come down.
iPhone revenues have broken extraordinary records quarter-after-quarter since Steve Jobs introduced these little touch-screen slabs in 2007.
The biggest spikes come in this current quarter, the holiday season, when Apple makes close to 40% of the year’s iPhone revenues.
Last year’s Q1 saw Apple sell an incredible 74.5 million iPhones, a huge jump from the 51 million it had sold the year before thanks to growth spurt in China and a slam dunk with new, larger screen phones.
In this last September quarter, Apple sold 48 million iPhones, another Q4 record. Last year the number was 39.3 million.
At the same time, while Android phone vendors like Samsung are slashing at prices to battle lower-cost competitors like, Xiaomi, Huawei and OnePlus, Apple has been raising the price of the iPhone.
For the past quarter Apple upped the iPhone’s average selling price by nearly $10 from the previous quarter, to $670. This time last year, the average iPhone sold for just $603.
Expectations are high for the iPhone to blast through the 74.5 million mark and show another set of spectacular numbers after this coming Christmas season.
Yet there’s still some reason to be cautious about how long this incredible growth will continue, and with a string of spectacular quarterly performances behind it, Apple has a tricky job managing expectations.
Apple’s 48 million iPhone sales for the quarter were slightly lower than Wall Street’s expectations of sales of 48.6 million.
Not only that, its forecasts for the all-important Q1 holiday season were also on the lower end of what analysts had been hoping: Apple said it expects sales of between $75.5 billion and $77.5 billion for the December quarter, while analysts were expecting sales of closer to $77.1 billion.
Sanford Bernstein analyst Toni Sacconaghi believes that Apple’s heady growth days are now behind it. He’s forecasting iPhone sales of 75 million units for the quarter, so more of a minor improvement than another blowout like last year.
“The fear is Apple is entering growth purgatory,” Sacconaghi told CNBC. “It had the great, last cycle with the iPhone 6. The fear is that smartphones are an increasingly mature market particularly at the high end. That’s almost all of Apple’s earnings and growth. And accordingly the concern is it won’t really grow going forward.”
“The law of large numbers does kick in,” he added. “Can the iPhone grow another 2-3 years or is it done growing?… I think investors are worried about the next two-year period. ‘Can there really be iPhone growth?’ Because absent that there’s not really going to be much growth from Apple.”
