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Although Apple’s latest financial report and forecasts were better than expected, the stock price has fallen as the market has already reflected optimistic expectations; Rising memory prices, slow service growth and lower-than-expected Greater China have become hidden concerns.
Apple(Apple )’s latest financial report and year-end peak season financial guidance were both better than expected, but the stock price fell nearly 4% after hours. Investors originally bet on Apple to deliver more impressive results, but rising memory prices may reduce profits, coupled with a slowdown in the growth of the services business, it ultimately failed to meet market expectations.
Apple announced that its revenue in the last quarter ended in September increased 12% year-on-year to US$114.48 billion, exceeding market estimates of US$113.5 billion; Earnings per share were US$2.10, which was also better than expected. Of this amount, US$0.05 comes from tariff rebates.
Jake Behan, director of capital markets at Direxion, noted that if this gain were excluded, the financial report would not be as impressive, which could be one reason for the lackluster reaction to the stock price.
Apple expects revenue this quarter to grow 7% to 10% year over year, above market forecasts of 6.1%, according to Bloomberg data. Chief Financial Officer Kevan Parekh even estimates that revenue will reach a record high this quarter. However, Apple’s stock price has risen sharply since the end of June, increasing its market value by nearly US$1 trillion, and the market’s previous optimism has been reflected in the stock price.
This is the first financial report from new CEO John Ternes since taking over in September. last seasoniPhone Revenue was US$57.58 billion, an increase of 17% year-on-year, which was better than expected. Turners revealed that the number of global iPhone users replacing their phones reached a record high over the year. Revenue in Greater China increased 21% year-on-year to US$17.5 billion, which was US$1 billion below market expectations.
Rising memory prices are another concern. Affected by the AI craze that has driven up memory prices, Apple estimates its gross profit margin will decline from 47.9% last quarter to 45% to 46% this quarter. Expenses related to the AI version of Siri have also come under pressure.
Apple is responding by raising prices, pre-stocking and reducing the cost of other components. Inventories at the end of September reached US$14.54 billion, an increase of 154% year-on-year; The volume of manufacturing purchase commitments also increased by US$33 billion compared to the end of June. Turners expects memory costs to rise further this quarter.
In terms of new products, the first foldable phone iPhone Duo sold out quickly after launch. However, some users reported cracks on the screen. In an exclusive interview with Reuters, Turner said that a small number of mobile phones have been recalled due to screen problems, and Apple is replacing affected users. Duo is currently in short supply, and it is impossible to predict when supply will equal demand.
In addition, the growth of Apple’s services business has slowed. Service revenue last quarter was US$31.57 billion, an annual increase of 9.8%; Growth is expected to be 8% to 9% year-on-year this quarter, which is less than the market expectation of 10%.
Apple invested an additional US$28 billion to buy back its own shares last quarter, which was equivalent to US$28 billion in operating cash flow last quarter.
Summary FAQ
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Apple’s revenue and earnings per share were better than expected, and its peak season financial forecast also exceeded market expectations. However, investors had already bet on strong performance, and part of the gains came from tariff exemptions, so the reaction was cool.
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Due to rising memory prices driven by the AI craze, Apple estimates its gross profit margin will decline to 45% to 46% this quarter, from 47.9% last quarter. Although the company has responded through price increases and stockpiling, costs may continue to rise.
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Last quarter’s service revenue increased by 9.8% year-on-year, but this quarter’s growth is expected to be only 8% to 9%, which is lower than market expectations; Greater China revenue increased 21% year-on-year but was still below expectations, suggesting growth is slowing.
