Apple Inc. (NASDAQ: AAPL) surprised investors Tuesday with a slight earnings beat that showed off what some think may be the future of the company as it reported record revenues on Services despite an expected drop in sales of its signature iPhone.
Analysts, on average, expected the iPhone maker to report EPS of $4.17 on revenue of about $84 billion. Instead, the figure was $4.18, on sales of $84.3 billion. The company foresees Q2 sales of $55-$59 billion, compared to estimates of $58.99 billion.
Gross margin was 37%-38%, while Q1 operating cash flow $26.7 billion. Net cash balance at the end of Q1 chimed in at $130 billion.
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pple, which had become the first $1-trillion company last summer, had already set expectations lower for a disappointing quarter due to sluggish iPhone sales, lowering its revenue forecast one month ago.
"While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate that the underlying strength of our business runs deep and wide," CEO Tim Cook said in the release.
Apple said iPhone revenue dropped 15% from the prior year. But all other revenue grew 19%, and services revenue reached a record $10.9 billion, up 19% from the prior year.
Apple officials have said services — such as App store downloads — are a better indicator of how the company is performing. It's a market the company believes is a big part of its future as the smartphone market becomes saturated.
Shares in Apple rocketed $7.12, or 4.6%, to $161.80
