Apple reports record quarterly revenue despite iPhone sales miss – SiliconANGLE News

Apple Inc. has just delivered its “best quarter ever,” with record-breaking revenue helping to boost its stock even as iPhone sales missed expectations.

That, added to a positive forecast for the coming quarter, sent the company’s stock higher in extended trading.

The company reported fiscal 2025 first-quarter earnings before certain costs such as stock compensation of $2.40 per share, beating Wall Street’s $2.35-per-share forecast. Revenue for the period inched up 4%, to $124.3 billion, also surpassing the Street’s target of $124.12 billion. They were strong numbers and they helped Apple to deliver an overall net profit in the quarter of $36.33 billion, rising from the $33.91 billion profit it posted one year earlier.

Looking to the current quarter, Apple declined to provide official guidance but said it’s expecting revenue growth in the low- to mid-single digits from the same period last year. In addition, the company said it expects to see growth in the “low double digits” for its Services division.

However, the strong dollar is likely to drag on its overall sales by about 2.5%, officials said. After accounting for the currency headwinds, it’s expecting an overall growth rate of around 6%. Wall Street analysts are expecting the company to report earnings of $1.66 per share on revenue of $95.46 billion in the second quarter, which suggests slightly slower growth of around 4%.

Apple’s stock rose just over 3% in late trading, suggesting that investors were pleased with the results, even though sales of the company’s flagship iPhone declined slightly on a year-over-year basis, missing expectations. The company said iPhone generated $69.14 billion in sales, below the Street’s target of $71.03 billion.

The quarter just gone was the first full quarter of iPhone 16 sales, the company’s latest-generation device, which introduces new artificial intelligence features through the Apple Intelligence suite.

It was the first time Apple has missed expectations on iPhone sales since the first quarter of fiscal 2023. Back then, the company said it had missed targets because of production issues in China, meaning it couldn’t get enough iPhone 14 models into the hands of customers.

This time around, Apple was impacted by significant weakness in the Greater China region, which includes mainland China, Hong Kong and Taiwan. Sales there fell 11.1%, to just $18.51 billion.

In an interview with CNBC, Apple Chief Executive Tim Cook (pictured) explained that iPhone sales were stronger in English-speaking countries, of which only a handful can currently access the Apple Intelligence suite. The AI software isn’t available at all in China.

“We saw that in markets we had rolled out Apple Intelligence that the year-over-year performance on the iPhone 16 family was stronger than those markets where we had not rolled out Apple Intelligence,” Cook said.

That suggests iPhone 16 sales might pick up in the coming months, for Cook added that the company will release Apple Intelligence in additional languages and markets in April, including a version of the software in simplified Chinese.

According to Cook, sales in the Greater China were affected by a couple of factors. Besides Apple Intelligence being unavailable, there was a change in “channel inventory” that was responsible for about half of the overall decline there. Cook added that he believes iPhone sales are likely to be boosted in the current quarter, since the Chinese government has just issued a national subsidy that will stimulate economic activity.

In the earnings report, Apple said it had a gross margin of 46.9%, which is the highest on record, surpassing the 46.6% margin that it delivered in its March 2024 quarter. Gross margin refers to the profit from each product sold after accounting for the cost of manufacturing and delivering those goods.

Elsewhere in Apple’s business, the company did a lot better. For instance, sales of Apple’s iPad and Mac devices both showed healthy growth after struggling in the previous year’s holiday quarter. Mac revenue was up 15% to $8.99 billion, easily surpassing the Street’s target of $7.96 billion, while iPad sales reached $8.09 billion, also up 15% and ahead of the $7.32 billion forecast.

Mac sales were boosted by the launch of several new devices in October, including the latest versions of the Mac Mini and MacBook Pro, and the all-new iMac computer. The company also debuted a new iPad Mini in the quarter. Cook said there was “significant excitement” about the new Mac lineup.

The company also saw strength in its Services division, which is its biggest profit driver, accounting for subscriptions, warranties and licensing deals. The unit delivered $26.34 billion in revenue during the quarter, up 14% from a year earlier and just ahead of the Street’s target of $26.09 billion. According to Cook, the company now counts more than 1 billion subscriptions for services such as iCloud and Apple TV+, as well as third-party applications that are sold via the Apple App Store.

The Services business has become a key profit engine for Apple, which for years was widely considered to be a hardware company. For years, the company struggled to boost its gross margin above 38% to 39%, but that changed when Cook began putting more emphasis on subscription services. That helped push the company’s gross margin to over 40% in early 2021, and it has continued to expand since then.

Finally, the company’s “other products” category, which encompasses wearables such as the Apple Watch, the Vision Pro virtual reality headset and audio devices such as AirPods and Beats headphones, saw sales fall 2% on an annual basis, to $11.75 billion, trailing the $12.01 billion target.

Photo: Mike Deerkoski/Flickr