(Bloomberg) -- Apple Inc.’s new iPhones will help the technology giant return to growth in the key holiday period, supported by a growing collection of other products and services.
The company projected fiscal first-quarter revenue that beat analysts’ estimates, signaling solid demand for iPhone 11 models, new services like Apple TV+ and wearables such as upgraded AirPods and the Apple Watch.
The shares rose, but gains were limited. Optimism was tempered by falling revenue in many markets outside the Americas, a weaker performance from the Mac computer division and a surge in the stock ahead of the results on Wednesday.
Fiscal first-quarter sales will be $85.5 billion to $89.5 billion, the Cupertino, California-based company said in a statement. Analysts were looking for $86.5 billion, according to data compiled by Bloomberg.
Chief Executive Officer Tim Cook said “we’re very optimistic about what the holiday quarter has in store.” During a conference call with analysts, the CEO went further by saying early trends looked very good based on the uptake of the new phones. "You can tell from the guidance we are bullish," he added.
See our live blog coverage of Apple’s analyst call here.
The new forecast means Apple will return to growth, after missing sales targets in last year’s holiday period. Fiscal fourth-quarter revenue and profit also topped Wall Street estimates.
“This was a strong quarter and this should silence some of the concerns out there regarding the iPhone,” said Shannon Cross of Cross Research. “The guidance was also strong.”
Apple shares rose about 2% in extended trading on Wednesday. The stock closed at $243.26 in New York earlier on Wednesday, leaving it up more than 50% this year.
While Apple has developed different devices and new digital services in recent years, it still relies on the iPhone for more than half of its revenue and profit. The handsets are also the hub for the company’s other offerings, so investors remain transfixed by the fortunes of the iconic device.
Analysts had become increasingly bullish on iPhone 11 sales. Apple cut some prices and has offered more attractive trade-in deals. And there are hundreds of millions of aging iPhones that will need to be upgraded soon. Still, a trade war between the U.S. and China has sparked concern that Chinese consumers may favor domestic smartphones over Apple’s product. And lower iPhone prices have some analysts worried that revenue growth will be harder to come by.
The latest iPhones and Apple Watch went on sale on Sept. 20 and the quarter ended on Sept. 28, so Apple’s fiscal fourth-quarter results included some early sales of these devices.
Apple reported fourth-quarter sales of $64 billion, up 1.8% from a year earlier. Net income was $13.7 billion, or $3.03 a share, versus $14.1 billion, or $2.91 a share, in the same period last year. Analysts were looking for revenue of $63 billion and profit of $2.84 a share.
The company said it sold $33.4 billion worth of iPhones in the quarter, beating analysts’ estimates of $32.3 billion, but still down from $36.8 billion in the year-ago quarter.
The Wearables, Home, and Accessories segment, which includes the Apple Watch, AirPods, HomePod, Apple TV, and Beats headphones, generated $6.5 billion in revenue, an increase of 54%, easily topping Wall Street estimates.
The Services division is growing at a faster rate. This quarter, revenue jumped 18% from a year earlier. In the fiscal third quarter sales rose 13%.
Apple Arcade, the company’s video game service, launched on Sept. 19 with a one month free trial, so Apple did not generate any revenue from the $4.99-a-month offering in the fiscal fourth quarter. Apple TV+ launches Nov. 1, while the Apple Card and Apple News+ launched earlier this year.
Still, sales fell in several areas outside the U.S. In China, revenue slipped 2% to $11.1 billion. Sales in Japan and Europe also declined.
Apple said it generated $7 billion in revenue from the Mac segment. That was down 5% and missed Wall Street expectations.
(Updates with link to live blog in seventh paragraph.)
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