Apple Jumps After Beating Muted Expectations, Despite $5 Billion Plunge In China Sales

Apple also reported that revenue from Mac and Wearables, Home and Accessories also reached all-time highs, growing 9% and 33%, respectively, to $7.4BN and $6.7BN while revenue from iPad grew 17 percent.

The full breakdown by product line is as follows:

  • iPhone: $52 billion, down from $61 billion
  • iPad: $6.7 billion, up from $5.8 billion
  • Mac: $7.4 billion, up from $6.8 billion
  • Wearables/Home/Accessories: $7.3 billion, up from $5.5 billion
  • Services: $10.9 billion, up from $9.1 billion

Meanwhile, for those curious just how bad Apple's China revenues were, the answer is the following: very. Because while Apple reported a modest drop in Japan and European sales, the 26.7% plunge in China revenue fully explained the company's guidance cut, with the drop in China sales amounting to nearly $5 billion (from $18BN to $13.2BN).

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Looking ahead the numbers weren't much better, with the company now forecasting revenue between $55 billion and $59 billion, on the low end of Wall Street's forecast of $58.97BN, and more importantly, another Y/Y decline compared to the $61.1BN a year earlier.

For Q3, Apple also forecast:

  • gross margin between 37 percent and 38 percent
  • operating expenses between $8.5 billion and $8.6 billion
  • other income/(expense) of $300 million
  • tax rate of approximately 17 percent

Tim Cook also highlighted Apple's device user base is at 1.4 billion, meaning it grew by 100 million since the year-ago quarter.

According to CFO Luca Maestri, Apple returned over $13 billion to investors during the quarter through dividends and share repurchases, with the net cash balance rising to $130 billion at the end of the quarter from $122.6 billion.

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Putting all this together, investors were rather happy with the earnings which did not contain any more shocks or surprises, and the stock was modestly higher after hours, rising just enough to fill the gap from the plunge following the Jan 3 guidance cut.

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