Apple has still got some gas in the tank.
Both profits and sales exceeded expectations from analysts. Here’s all the ways Apple surprised them.
Why this matters: Apple might as well be the iPhone company. iPhone sales account for more than half of Apple’s revenue. Apple takes the lion’s share of profits in the US smartphone sector, despite having the minority of market share. iPhones are the long and the short of Apple’s meteoric rise, and wherever their sales go, so goes the future of Apple.
We told you Apple’s earnings would be flat due to a plateau in demand for iPhones and a slump in demand for iPads, and we were only right about one of those.
Analysts projected sales of 19.7 million iPads and Apple moved only 16.35 million. As we noted, there are probably a bunch of reasons for Apple’s rapidly contracting iPad sales. Briefly, they are: the slow rate at which tablets need to be replaced, the fact that cheaper tablets are just as good for most tasks as an iPad, and the fact that most people just don’t need a tablet, so the novelty appears to have worn off.
Apple’s boffo iPhone sales more than made up for precipitously declining sales of iPads (and also iPods and even Macs). Analysts projected $43.6 billion in sales, the company booked $45.6 billion.
Apple is selling lots of phones and the market for them is definitely not saturated, or at least it wasn’t as of last quarter. Sales in China through the China Mobile deal have helped, but there’s another factor worth considering: Even in rich countries, there are still late adopters Apple has yet to scoop up, as well as increasingly sophisticated consumers who switched to the iPhone after buying the kind of cheap and less-usable Android devices that are often pushed on first-time smartphone buyers.
If the rumors of a larger iPhone coming later this year are true, and that helps Apple unlock the “phablet” market in Asia and elsewhere, Apple’s declining sales of everything else might not matter.
Truly, Apple is more of a phone company than ever.