China powers Apple’s $18bn record profit

Apple’s quarterly results smashed Wall Street expectations with record sales of big-screen iPhones in the holiday shopping season and a 70% rise in China sales, powering the company to the largest profit in corporate history.

The company sold 74.5m iPhones in its fiscal first quarter, ended December 27, while many analysts had expected fewer than 70m.

Revenue rose to $74.6bn from $57.6bn a year earlier.

A profit of $18bn was the biggest ever reported by a public company, worldwide, according to S&P analyst Howard Silverblatt. Apple’s cash pile is now $178bn, enough to buy IBM or the equivalent to $556 for every American.

Apple CEO Tim Cook said the Cupertino, California-based company would release its next product, the Apple Watch, in April.

The company’s shares rose about 5%, to $114.90, in after-hours trade. Daniel Morgan, senior portfolio manager at Apple-shareholder Synovus Trust Company in Atlanta, Georgia, said the report was a good sign in a quarter where big tech companies, such as IBM and Microsoft, have disappointed.

Apple’s chief financial officer, Luca Maestri, told Reuters in an interview that the company did not sell more iPhones in China than the US, despite some earlier predictions by research analysts. But the big-screen iPhone 6 and 6-Plus drove revenues in China up 70% in the quarter from a year earlier.

The company’s success in the competitive Chinese market can be attributed to its partnership with China Mobile, the largest global mobile carrier, and the appeal of the larger screen size of the iPhone 6 and 6-Plus.

Mr Maestri said he does not expect Apple to struggle because of China’s slipping economic growth. “We haven’t seen a slowdown.”

Mr Maestri also said the company doubled iPhone sales in Singapore and Brazil. Apple will reach 40 company stores in greater China by mid-2016, Mr Maestri told analysts on a conference call.

Apple reported net profits of $18.02bn, or $3.06 per diluted share, compared with $13.07bn, or $2.07 per share, a year earlier. That topped expectations of $2.60 per share, according to Thomson Reuters. Analysts had expected revenue of $67.69bn.

Mr Maestri said that Apple faced “a clear headwind” from the strong dollar but that it had included the challenge in its forecasts. Apple predicted revenue of $52bn-$55bn in its fiscal second quarter, compared with Wall Street’s average target of $53.79bn.

Mr Cook said the company’s new mobile payment service, Apple Pay, which lets customers buy products from select merchants with their phones, was in its “first inning” and the company would consider adding new features as it looked at expanding outside the US.

Reuters