Apple delivers record sales and rising profits as iPhone makes a comeback

Technology giant sells £43bn-worth of its latest smartphone, sending shares to new high

iPhone sales grew for the first time in a year (Getty)

Apple posted record profits in the final three months of last year after a surge in demand for iPhones in the run-up to Christmas.

Revenues and profits both beat analysts’ expectations in the October to December period, allaying fears that Apple’s growth was under threat as consumers hold onto their smartphones for longer before upgrading.

iPhone sales grew for the first time in a year while the Apple Watch, which the company started selling nearly five years ago, gained new converts. The latest version of Apple’s wireless earbuds AirPods sold well during the festive season.

Shares in the company rose 1 per cent after the announcement. Apple has more than doubled in value since a low last year, adding more than $725bn (£560bn) to its market capitalisation and cementing its position as America’s most valuable company.

Apple sold $56bn-worth (£43bn) of iPhone 11s in the quarter, following the launch of the latest iteration of the firm’s flagship handset in September. A cheaper versoin of the new phone also proved popular.

Overall, sales in the last three months of 2019 rose 8 per cent year-on-year to $91.8bn (£75bn), while net profits jumped 11 per cent to reach $22.2bn (£17bn).

Wary that consumers’ appetite for constantly replacing their smartphones may soon reach its limit, Apple has focused on expanding its offering of services to sell to owners of the 1.5 billion of its devices already in use.

The company has mounted a big push of its new Apple TV Plus video-streaming services, which launched in October to take on Netflix, offering US customers a free year’s subscription with every new iPhone.

However, hardware still accounted for $79bn (£61bn) of quarterly revenues, dwarfing the $12.7bn (£9.8bn) generated by services.

“The contrast with a year ago could hardly be bigger,” said Russ Mould, AJ Bell investment director.

“Apple’s first-quarter results for 2018-19 followed on from a January profit warning and showed the first year-on-year drop in earnings per share for 10 quarters.

“The results for the first three months of 2019-20 show the first revenue growth from the iPhone in five quarters, renewed sales and earnings momentum across the company as a whole and feature guidance for the second quarter.”

Apple chief executive Tim Cook said the company is concerned about the coronavirus outbreak in China, which is both a major market and home for large amounts of its manufacturing business.

Mr Cook indicated that Apple had given a wider prediction for its next quarter than usual because it was unclear how the virus outbreak would hit its business.

“We have limited travel to business-critical situations as of last week,” he said. “The situation is emerging, and we’re still gathering lots of data points and monitoring it very closely.”

Apple has suppliers in the Wuhan area, the heart of the outbreak, but has alternatives, Mr Cook said. Factories outside Wuhan area will not reopen after the lunar new year holiday until 10 February, Mr Cook said, but Apple built the delayed restart into its wider revenue forecast.

Additional reporting by agencies