Dive Brief:
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Apple’s Q3 profits surged 38% and its iPhone sales surged 35% year-over-year, thanks largely to strong growth in China, the company said Tuesday.
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But shares tumbled up to 7% in after-hours trading on the news, as many on Wall Street had expected even more iPhone sales.
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The company didn’t provide its Watch sales, sliding them in the “other” category along with Beats and music sales, but said the Watch is beating the company’s own expectations. Sales of that “other” category grew 49% to $2.64 billion.
Dive Insight:
Apple is doing well in all kinds of ways. As sales of PCs in general falter, that remains a strong category for them. And the company sold a lot of iPhones last quarter—47.5 million. This quarter is traditionally a soft one for iPhone sales because many people wait for the newest models, which are typically released in the fall. But what investors were hoping, say many, was for the iPhone 6 to break that tradition.
“It deals a blow to that thesis,” Mizuho Securities tech analyst Abhey Lamba told the Wall Street Journal.
Some on the street expected as high as 52 million iPhones to sell in Q3; a more consensus expectation was for 49 million. A miss, no matter how you slice it.
The street reaction shows what nervous nellies investors can be. The truth is that the iPhone remains a blockbuster seller and the iPhone 6 in particular has done a good job of stymieing Android’s advancement in the bigger-screen category. As Tim Cook noted Tuesday, many iPhone users have yet to upgrade, leaving a lot of room for more future sales.
It may not help that the Watch still sports a big question mark. Apple says sales beat its own expectations, but didn’t give a clue about what that number was. The Watch and wearables could take off, but they have yet to. And the iPad, which was once touted as a major threat to the PC, took another sales hit this quarter. Could the Watch could suffer a similar fate? We just don’t know yet.
