Apple Inc. reported its fourth consecutive quarter of record revenue and profit, as the combination of higher iPhone prices and strong app-store sales propelled the technology giant to its best year ever.
Revenue for the three months ended Sept. 29, the final fiscal quarter, rose nearly 20% to $62.9 billion from the same period a year earlier, while profit soared 32% to $14.13 billion, Apple said Thursday.
The results offered affirmation for two main pillars of Apple’s current strategy: promoting its software-and-services business and raising prices on its flagship iPhones to compensate for slower growth in unit sales. Both aim to capitalize on the loyalty of customers who use iPhones for everything from communication and shopping to watching video and reading the news.
Though the number of iPhones sold world-wide edged up less than 1% over the past year to nearly 218 million, higher prices helped the world’s most valuable company deliver record revenue of $265.6 billion in the fiscal year, up 14% from its previous high in fiscal 2015.
Apple’s guidance for the current quarter, however, is likely to disappoint some investors. The company said it expects revenue in the current period—traditionally its strongest of the year—of between $89 billion and $93 billion. Analysts’ consensus estimate is for revenue at the high of that range on hopes for strong demand for the $749 iPhone XR, $999 iPhone XS and $1,099 iPhone XS Max that Apple unveiled in September. Revenue in the December quarter last year totaled $88.3 billion.
Chief Financial Officer Luca Maestri said the forecast reflects the fact that Apple introduced its priciest iPhones in September this year, whereas a year ago it began selling the pricier iPhone X in November. Additionally, economies in developing markets such as Turkey and Brazil have weakened, and foreign currencies have weakened against the dollar.
Still, even the low-end of guidance would provide another quarter of record revenue, Mr. Maestri said. “We are starting the new year with a lot of confidence and the strongest product lineup we’ve ever had,” he said, pointing to the new iPads, MacBooks and iPhones unveiled over the past two months.
Shares of Apple fell 3.7% to $214 in after-hours trading.
The company’s quarterly results come amid stock-market turmoil for tech companies, aggravated by mixed signals in earnings reports from other industry giants over the past couple of weeks. Tech shares have tanked amid investor unease with sky-high valuations, as well as slowing revenue growth and rising costs at some companies amid controversies of the power and responsibility of some internet platforms like Facebook Inc. and Google.
Apple, which in August became the first U.S. company to surpass $1 trillion in market value, has fared far better than many other tech titans in the recent swoon. Its stock closed at $222.22 on Thursday before its earnings report, down less than 5% from its all-time high in early October.
Apple remains “one of the best positioned companies in tech for the long term,” said Greg Hersch, founder of New York City-based Florence Capital Advisors, a fund with more than $400 million under management that counts Apple among its largest holdings. He pointed to its enormous pile of cash, saying “it gives them another lever to pull if innovation is not meeting customer expectation” and “the ability to weather the next economic slowdown.”
Apple last year raised the starting price for its flagship iPhone by about 50% to nearly $1,000. In the latest quarter, revenue from the device, which accounts for most of Apple’s sales and profit, rose 29% to $37.185 billion, despite flat unit sales.
Revenue in the services business—including app-store sales, Apple Pay use and music-streaming subscriptions—reported record revenue of $9.98 billion, up 17% from a year ago. That is slower than recent quarters but keeps Apple on track to fulfill Chief Executive Tim Cook’s promise that services will be a $50 billion business by 2020.
Apple’s China business, which has been accelerating in recent quarters, continued to improve even as the Chinese economy weakens. Sales in Greater China, which includes Hong Kong and Taiwan, rose 16% to $11.41 billion in the period.
The iPhone maker avoided having its devices swept up in the Trump administration’s most recent round of tariffs of 10% on $200 billion of Chinese imports. Still, those tariffs are set to rise to 25% early next year, and President Donald Trump says tariffs eventually will be expanded to all Chinese imports, which would include iPhones, smartwatches and other gadgets. Such a move would increase the danger that the Chinese retaliate by punishing Apple’s business in China, trade experts say.
Mr. Maestri said Apple is watching trade issues with China closely, but said “the interest in our new products has been very good.”
Looking ahead, Apple has begun expanding the price increases it introduced with the iPhone to other devices. Since September, it has raised the prices more than 20% on updates to its smartwatches, Macs and iPads.
“The open question now is: How much pricing power does Apple have?” said Sean Stannard-Stockton, president of Ensemble Capital Management, a Burlingame, Calif.-based that counts Apple among the 25 companies it holds with its $800 million under management. “Maybe they have even more pricing power than we in the market appreciate.”
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