Apple iPhone demand fuels record holiday sales, but coronavirus fears loom

Wall Street watching for potential coronavirus impact

Strong demand for Apple’s latest line of iPhones as well as other new hardware fueled the tech giant to record first-quarter sales and earnings for its critical holiday season.

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Apple’s earnings report was its first full update since its release of three variants of the iPhone 11 last September. Sales of the iPhone, traditionally Apple’s biggest revenue driver, are considered a crucial bellwether for the health of its overall business. The holiday quarter is Apple’s most lucrative in terms of revenue and subject of close scrutiny on Wall Street.

“We are thrilled to report Apple’s highest quarterly revenue ever, fueled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables,” Apple CEO Tim Cook said. “During the holiday quarter, our active installed base of devices grew in each of our geographic segments and has now reached over 1.5 billion. We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board.”

Apple posted diluted earnings per share of $4.99, beating the $4.55 per share expected on Wall Street, according to Refinitiv data. Quarterly revenue reached a record $91.8 billion, up nine percent compared to the same period one year ago. The sales figures topped Apple’s holiday guidance from last October, which called for revenue of between $85.5 billion and $89.5 billion.

Apple reported earnings as China, one of its crucial international markets contends with an outbreak of the deadly coronavirus. Cook said Apple has limited business-related travel to China and begun efforts to mitigate any negative impact to its production capabilities in the region. The outbreak forced the closure of one of Apple's retail locations in China.

The company provided second-quarter guidance with a wider range than usual, projecting revenue of between $63 billion and $67 billion. Executives said the wider range stemmed from uncertainty related to the coronavirus outbreak.

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For the first quarter, iPhone sales amounted to $56 billion, up from about $52 billion in the same period one year ago. Sales of wearable devices, such as the noise-canceling AirPods Pro, topped $10 billion, up from $7.3 billion year-over-year.

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Wall Street will also look for details on the launch of Apple+, the tech giant’s streaming service, which debuted at the start of the holiday quarter on Nov. 1. Apple has emphasized growth of its services, such as the iCloud and Apple Music, to offset slowing global demand for smartphones.

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Revenue from services was $12.7 billion, up from $10.9 billion year-over-year.

Revenue in Greater China rose slightly to $13.6 billion, up from $13.2 billion in the same quarter one year ago.

The sales beat came one year after Apple spooked investors with a rare cut to holiday guidance, citing weak demand for the iPhone among Chinese consumers.

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This is a developing story. Check back for updates.