Despite analyst fears that Apple couldn’t match last year’s record holiday quarter sales of $74.6B, the guidance issued by the company indicates that it expects to do so. Analysts had been concerned that last year’s record sales had been driven by pent-up demand for larger-screened iPhones, demand that has now been satisfied.
Apple, however, disagrees. The company yesterday issued guidance of $75.5B to $77.5B revenue, which would be a new record. It also said that it expects to maintain its high profit margins into the final quarter of the calendar year (Q1 of Apple’s fiscal year) …
The company also reported a gross margin of 39.9%, above its own expectations, and said that it expects the number to remain in the 39-40% range in the holiday quarter. Apple has managed to steadily increase the average selling price of the iPhone, from $603 last year to $670 this year.
The company announced that fiscal 2015 was “Apple’s most successful year ever, with revenue growing 28% to nearly $234 billion.”
Cook told analysts there were three reasons to believe that it can continue to grow its iPhone business. First, while many iPhone users upgraded to the iPhone 6 or 6s, the majority have yet to do so, Some two-thirds of iPhone owners are still using earlier phones, leaving plenty of room for upgrade sales to existing customers.
Second, Apple is winning over Android owners in record numbers. Some 30% of new iPhone buyers switched from an Android smartphone, and Apple is confident of maintaining this momentum.
Third, Cook still sees tremendous potential for continued growth in China. The company doubled its year-on-year quarterly revenue in the country, to $12.5B, with the WSJ noting that the high price tag of the iPhone is actually a draw rather than a barrier to continued growth.
The iPhone continues to do well in China, where it has become a premium brand akin to Prada bags or Rolex watches. As more Chinese consumers enter the middle class with greater disposable income, they are embracing the iPhone.
What’s more, the iPhone’s hefty price tag—once considered a liability—now works in Apple’s favor, allowing it to stand out from a fast-growing pack of low-cost smartphones and reinforcing the view that its products are of a higher quality.
Cook dismissed concerns about the Chinese economy, saying that Apple isn’t seeing any downside. “You really can’t tell a difference if you look at our daily and weekly numbers,” he said (per CNET), with Apple in any case taking a long-term view. “We’re investing for the decades ahead.”
Photo: Getty Images/Justin Sullivan
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