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Premium 5G iPhones and Subscriptions Drive Apple Sales | Economic and business news

Apple said Tuesday that its third quarter iPhone sales were $ 39.57 billion, nearly 50 percent more than last year and above analysts’ expectations.

Apple Inc reported quarterly sales and earnings on Tuesday that exceeded analysts’ expectations as consumers bought premium versions of its 5G iPhones and signed up for the company’s subscription services.

Driven by better-than-expected iPhone sales, total sales reached $ 81.43 billion, which was above analysts’ expectations of $ 73.30 billion, according to IBES data from Refinitiv. Earnings were $ 1.30 per share, according to Refinitiv, above estimates of $ 1.01 per share.

The strongest sales growth for Apple came from China, where chief executive Tim Cook told Reuters that customers are buying accessories like the Apple Watch to pair with their iPhones. Sales in China rose 58 percent to $ 14.76 billion in the third fiscal quarter ended June 26.

“It wasn’t just the iPhone. We have set a new quarterly record for Mac, for wearables, home and accessories and for services, ”said Cook in an interview with Reuters in China. “It was our strongest geography.”

Apple also appears to have avoided a major blow from a global chip shortage so far.

The results come because investors who once feared Apple was too dependent on sales of its signature computing device, the iPhone, drove the company’s value to nearly $ 2.5 trillion, which is up in about three years than has doubled.

Rather than a risk, these investors are now seeing the iPhone as the consistent center of a constellation of related purchases in the Apple ecosystem, from watches and wireless earbuds to apps and paid services.

Apple launched its iPhone 12 models later than usual last year, all of which can connect to faster 5G wireless networks thanks to chips from Qualcomm Inc. As that delay drove into the second some iPhone purchases that would normally be made in the company’s first fiscal quarter, executives had warned investors to expect a bigger-than-usual drop in iPhone sales in the third quarter as consumers begin buying withhold new generation of cell phones in anticipation of a surge.

But the impetus to upgrade to 5G seemed to be creating a better buying cycle for iPhones than many analysts expected. Apple said iPhone sales were $ 39.57 billion, nearly 50 percent more than last year and above analysts’ expectations of $ 34 billion.

Cook told Reuters that Apple’s iPhone 12 Pro and 12 Pro Max, the premium tier of the device, were strong sellers. According to Refinitiv, this has helped increase gross margins to 43.3 percent, above the estimates of 41.9 percent.

The other major driver of Apple’s results was the services business, which includes paid TV and music subscriptions and the App Store. Service revenue reached a record high of $ 17.49 billion, a third more than last year and above analysts’ expectations of $ 16.33 billion. Cook told Reuters that Apple now has 700 million subscribers across its various platforms, up from 660 million in the previous quarter.

Cook said Apple set quarterly sales records for many of its first-party services, including its AppleCare hardware insurance plans, which slowed somewhat during the pandemic when many of the company’s retail locations closed.

But Apple had setbacks. Last quarter, Apple told investors that a global chip shortage could slow sales by $ 3-4 billion, largely due to shortages of secondary chips made with older technology for iPads and Macs.

Cook told Reuters that due to chip shortages, Apple had limited sales of Macs and iPads, but that the impact of the shortage on Apple’s overall sales was “lower than the lower end” of its previously forecast range. Sales of iPads and Macs were $ 7.37 billion and $ 8.24 billion, respectively, according to Refinitiv data, compared to analyst expectations of $ 7.15 billion and $ 8.07 billion, respectively.

In the longer term, Apple’s service business is confronted with regulatory risks. The company’s practice of charging developers selling on its app store 15 to 30 percent commissions and requiring them to use Apple’s payment system could be subject to review by regulators in the United States and Europe, where the Legislators are also proposing laws that could restrict some of Apple’s practices.

A judgment is also expected in the coming months in an antitrust lawsuit that the “Fortnite” creator Epic Games has filed against Apple.

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