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Apple expects profit to soar as iPhone X boosts strong sales

Apple is expected to unveil its biggest rise in profits since late 2015, with third-quarter revenue set to hit $52.9bn (€45.3bn), boosted by dearer iPhones and strong sales from its lucrative app store and services business.

Analysts and mobile industry sources expect investors in the Silicon Valley giant to receive the welcome news of another quarter of significant year-on-year growth when the group reports its quarterly results tomorrow night.

Some estimate growth as high as 37pc in earnings per share. It was only last quarter that Apple broke its own record for the biggest quarterly profit of all time, despite a fall in iPhone sales.

The technology giant sold 52.2 million iPhones in the second quarter of 2018, up by 2.9pc from 50.6 million in the same quarter the previous year.

The higher price of the new handsets meant that revenue from selling iPhones rose.

The high price tag for the iPhone X should buffer any further drop in sales, analysts predict. Insiders have said that Apple’s services – made up of the App Store, Apple Music, iCloud, iTunes, Licensing, Apple Care and Apple Pay – could soar by 19pc.

Apple’s sales and earnings are typically lower in the third quarter, prior to the arrival of new phone models, which are usually unveiled in September.

But Guggenheim Partners estimates that Apple will hit a 4pc increase in sales in comparison to the same period last year.

The promising figures are shrouded somewhat by figures from Gartner, suggesting that worldwide smartphone sales declined for the first time in 2017 and that growth could be cooling across the industry.

Analysts will use Tuesday’s earnings call to grill Tim Cook, Apple’s CEO, on how the company will evolve in a maturing smartphone market, where the pace of innovation has slowed.

The company’s failure to sell cheap phones to foreign emerging markets, such as India, might become “an issue”, Gartner smartphone specialist Annette Zimmermann said.

“Apple has not grown in any emerging markets because it don’t have a low-end device,” she explained. “I don’t see it wanting to take that seriously and that might become an issue”.

Apple’s Korean rival Samsung is also due to report results this week. Set alongside Apple’s, they will provide a glimpse into who is winning the smartphone war.

Investors will be eager to learn whether Samsung’s latest Galaxy S9, which was launched in February, has pipped the iPhone X to the post or whether the rumours that shoppers are suffering ‘smartphone fatigue’ are true.

Once a spectacular source of rising profits, the smartphone market has stagnated recently – but nevertheless remains enormously valuable.

Last year, shoppers snapped up 1.48 billion of the gadgets, spending $382bn, according to figures from analysts CCS.

However, smartphones have graduated to the ‘mature category’ of consumer electronics, with the pace of innovation more incremental than a few years ago.

Insatiable desire among consumers to swap their phone every year appears to have cooled. Western consumers are savvier, reading spec lists and armed with comparison websites to help them shop around.

Smartphone sales declined for the first time in 2017, according to Gartner, suggesting that the consumer frenzy has now hit a peak.

As sales stagnate, major players have turned to selling premium gadgets at a higher price tag. Apple’s plan to sell fewer units – but at a premium price – may pay off in the short term, but as smartphone growth slows it may regret its decision not to chase new consumers in emerging markets.

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