Apple sells more iPhones than expected and shares jump by 7%

Apple CEO Tim Cook said that India is now one of our fastest growing markets ... We’re looking forward to opening more retail stores there

Apple CEO Tim Cook said that India is now one of our fastest growing markets ... We’re looking forward to opening more retail stores there (AFP)

Apple sold more iPhones than Wall Street expected in the third quarter and estimated its revenue in the current period would top many analysts' targets, soothing fears that demand for the company's most important product had hit a wall.

Its shares rose 7 percent in after-hours trading.

The world's most valuable publicly traded company said it sold 40.4 million iPhones in the third quarter, down 15 percent from the year-ago quarter but slightly more than the average analyst forecast of 40.02 million, according to research firm FactSet StreetAccount.

Apple reduced channel inventory by $3.6 billion, exceeding the $2 billion expected reduction, meaning sales were better than they appeared, Maestri said.

Customer demand "was better than what is implied in our results and better than we had anticipated," he said.

"It's opening the door to customers we weren't reaching before," he said.

Apple's quarterly net profit fell 27 percent to $7.8 billion, while revenue of $42.36 billion beat analysts' average estimate of $42.09 billion, according to Thomson Reuters.

Sales in Greater China, once touted as Apple's next growth engine, decreased 33.1 percent, compared with a 112.4 percent growth in the year-earlier quarter and a near 26 percent fall in the second quarter.

Maestri attributed the drop to channel inventory reduction in the nation, foreign exchange headwinds and a general downturn in the Chinese economy.

"It is very clear that there are some signs of economic slowdown in China, and we will have to work through them," he said.

"It's not a revenue-related issue," he said. "This is a service we want to provide our customers."

Apple's services business, which includes the App Store, Apple Pay, iCloud and other services, generated nearly $6 billion in revenue, up 18.9 percent from the previous year.

As iPhone sales level off, Apple is attempting to use such services to wring more revenue out of its existing base of users. The business emerged as Apple's second largest after the iPhone for the first time in the second quarter, eclipsing gadgets such as the iPad and the Mac.

That shift bodes well for Apple because gross margins on services are better than the average for the rest of the company, Maestri said.

"It's a great business because it is recurring in nature and more linked to our installed base," he said.

Maestri touted music as an example of one successful service, saying the growth of the Apple Music streaming service had more than made up for declines in digital downloads. To redouble its momentum in music, Apple purchased rights to the next season of popular series Carpool Karaoke, CBS Television Studios announced on Tuesday.

India was one of the rare bright spots, with 51 percent growth in iPhone sales, as Apple expands into emerging markets.

Apple forecast fourth-quarter revenue of $45.5 billion to $47.5 billion, largely above Wall Street's average estimate of $45.71 billion, according to Thomson Reuters.

The forecast, covering the quarter ending in September, will likely include at least the first weekend of sales of the iPhone 7 range, which Apple is expected to launch in September.

Up to Tuesday's close, Apple's shares had fallen about 8.2 percent since the start of the year. Shares rose 7 percent to $103.47 in after-hours trade following publication of results.