Apple Inc. ($AAPL) has delivered impressive fiscal third-quarter results that exceeded market expectations, primarily fueled by robust sales in its iPad and Mac divisions, compensating for a decline in its flagship iPhone sales. For the quarter ending June 29, Apple reported earnings of $1.40 per share, a significant increase from $1.26 a year prior, surpassing the Capital IQ consensus estimate of $1.34 per share.
The technology giant's revenue surged 5% to reach $85.78 billion, despite contending with a foreign exchange headwind impacting results by 230 basis points, as indicated by Chief Financial Officer Luca Maestri during an earnings conference call Thursday. While the iPhone revenue saw a slight dip to approximately $39.3 billion from the $39.67 billion reported in the same quarter last year, on a constant currency basis, sales have reportedly experienced an uptick compared to the prior year.
Furthermore, the iPhone’s active installed base has reached a record high across all geographic segments, reflecting ongoing consumer demand and loyalty. In parallel, sales of Macs grew to $7.01 billion, up from $6.84 billion the previous year, showcasing a recovery in this category. The iPad segment experienced a remarkable 24% rise, generating $7.16 billion in revenue, strongly attributed to the launch of the new iPad Pro and iPad Air models.
Conversely, sales from wearables and home accessories slightly slipped by 2%, totaling about $8.1 billion. However, services revenue, which encompasses offerings like the App Store and Apple’s streaming platform, expanded by an impressive 14% year-over-year, reaching $24.21 billion. It's noteworthy that while Apple witnessed revenue growth across most geographic segments, sales in China fell by 6.5% to $14.73 billion.
Tim Cook, the Chief Executive Officer, commented on the situation in China, indicating that revenue only decreased by less than 3% when adjusted for currency fluctuations, suggesting that more than half of the annual decline was related to currency issues. "This represents an improvement from the first half of the fiscal year, and we are pleased to see the acceleration in customer engagement and revenues," Cook mentioned during the call. Looking ahead, Apple is optimistic about the upcoming September quarter, projecting revenue growth to mimic that of the last period, although they anticipate a foreign exchange related impact of approximately 1.5%.
Maestri emphasized that the company expects services revenue to continue to grow at a double-digit rate, reflecting the strong performance seen over the initial three quarters of the fiscal year. Wedbush Securities has expressed a positive outlook, suggesting that the introduction of artificial intelligence technologies within the Apple ecosystem could unlock substantial monetization avenues for both services and hardware, adding an estimated $30 to $40 per share to Apple’s valuation.
In a report issued to clients, the brokerage upheld its outperform rating on Apple’s stock while adjusting its 12-month price target upwards to $285 from $275, anticipating continued strong performance from the company. As of the latest market data, Apple's stock trades at $219.63, showing a change of +1.27 or a percent change of +0.58..