Slowing iPhone sales haven’t hurt Apple’s bottom line

Apple shrugged off lower-than-expected sales for the iPhone on Tuesday as shares rose sharply after market close, when investors got a glimpse of a far more important number: what the company projects sales to be next quarter.

The company said it expects to make $60 billion to $62 billion next quarter, exceeding analyst expectations of $59.6 billion. The forecast is a measure of how well Apple thinks it can fare in a market where consumer interest in having the latest and greatest continues to wane.

Apple, which makes about 56 percent of its revenue from the iPhone, has had to deal with slowing sales growth for its biggest product. The lure of faster, thinner, lighter phones used to send shoppers rushing to stores for the latest smartphones. But for the past couple of years, even premium smartphones have lost some appeal, and consumers are holding on to their phones for longer between upgrades.

Both Apple and Samsung have responded by offering more expensive phones. Samsung, Apple’s chief smartphone competitor, cited less frequent upgrades as a reason its flagship models failed to deliver expected sales in its Monday earnings call. Its mobile unit reported a 22 percent drop in sales revenue to $20.2 billion from the same time last year.

Yet Apple fared far better, delivering $29.9 billion in iPhone revenue, of an overall $53.2 billion. It reported $11.5 billion in profit, up from $8.7 billion in the third quarter of 2017.

The results show that Apple is positioned to keep its business growing despite slower smartphone sales, said Gene Munster, a longtime Apple analyst and founder of Loup Ventures.

“These numbers show us this is a franchise,” he said. Even when it comes to hardware, Munster said, the numbers prove Apple’s strategy is working.

Apart from consumer behavior, there is also concern that Apple’s extensive overseas manufacturing operation may suffer from trade disputes between the U.S. and China.

Analysts cautioned that it’s not yet clear how trade conflicts will affect the smartphone companies. In a note ahead of earnings, Andy Hargreaves of KeyBanc Capital Markets said that the “the risk of a direct impact from trade conflicts or increased nationalism among foreign consumers that damages international iPhone demand” might offset potential gains for Apple.