Apple set its expectations for the fourth quarter above what Wall Street was looking for today in its earnings report — just in time for a huge iPhone launch coming up soon.
Apple said it expected to generate between $49 billion and $52 billion in the fourth quarter. The midpoint of that falls above what Wall Street expected — around $49.2 billion — and it alludes to a big quarter where Apple has traditionally unveiled a new iPhone. The next one is expected to be a huge redesign, which could reignite Apple's stalling growth engine. Ahead of this, Apple has relied on growth in the rest of its product portfolio, particularly in services. Apple's Services bucket includes products like Apple Music and iTunes.
All this means that the company is expecting to rake in a nice bit of cash sooner than we might have expected. The stock is up more than 5 percent after the report, tacking on additional gains to an already solid year for the company. This huge quarter means that Apple has now hit an all-time high. Any jump for Apple — especially one as "large" as 5 percent — can add tens of billions of dollars to its market cap.
And speaking of predictable, the company's services grew 22 percent year-over-year. It generated around $7.3 billion in revenue from the company's soon-to-be-a-Fortune-100-company division according to CEO Tim Cook, up from nearly $6 billion in the third quarter last year.
For now, Apple is in a complete holding pattern. The next iPhone iteration is expected to be a radical change in design — possibly the biggest one since the company made the phones a whole lot larger. Those significant changes, should they tap into latent demand like it did with its larger phones, end up driving massive growth for the company. But the downside to all this anticipation for the phone is that a ton of people are holding out on buying new phones, which is where Apple generates most of its business.
It's done a few things to offset that recently, such as launching new variations of its iPad that are larger and more suited to enterprises. That may, in the future, be a play to get inside companies, but for now, they are more or less pretty glass slates that are very large and work well with a little stick.
Here's another story line we weren't necessarily expecting: the iPad is growing again. Apple said it sold 11.4 million iPads in the third quarter of 2017 — up from 10 million iPads in the third quarter last year. While unit sales are up, what's worth noting is that the company actually saw an increase in revenue year-over-year. It was a 2 percent jump, so it's pretty marginal, but any signs of life in the iPad is a good sign for Apple as it looks to have a complete portfolio of devices that can coexist and grow with the iPhone.
Apple also beat expectations across the rest of the board. Wall Street overall was expecting $44.89 billion in revenue and earnings of $1.57 per share. The company said it brought in $1.67 per share in earnings and revenue of $45.4 billion. Apple said it sold 41 million iPhones, about in line with what Wall Street was looking for at 41.1 million iPhones. It also sold 4.3 million Mac units.
While Apple holds out for those phones and the hope that they will end up being blockbusters for the company, it's trying to build out consistent revenue streams. That includes watches, a set-top box, a music streaming service and an array of other products that can help create a more predictable line of revenue. Predictable is great for Wall Street, as it means that the company will have a regular flow of cash to invest in those big swing-for-the-fences products — though Apple is an edge case given that it is sitting on hundreds of billions of dollars in cash.