Apple Tops Expectations on Strong iPhone Sales

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Usually, the problem with enormous success is having to match it.

Apple has set standards for its financial performance so high in recent years that even the slightest headwind can worry investors.

But on Tuesday, when Apple reported a lower profit compared with a year before, investors were not deterred, sending shares up in after-hours trading after the results beat analysts' expectations.

Apple reported that net income in the third quarter fell to $6.9 billion, or $7.47 a share, compared with $8.8 billion the same quarter a year earlier. The company said revenue was roughly flat at $35.3 billion, from $35 billion a year ago.

The net income beat the expectations of Wall Street analysts, who forecast $7.32 a share and revenue of $35 billion, according to a survey by Thomson Reuters.

The company has been showing signs of slowing growth, and the last quarter was no different. That is why investors have been clamoring for Mr. Cook to unveil "one more thing" -- the sly slogan used by Steven P. Jobs, Mr. Cook's predecessor, before he announced a major new product -- in the hopes that it will give Apple's sagging stock a much-needed lift.

No such product has been announced. In a statement, Mr. Cook said, "We are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014."

Even a less ambitious new offering might appease some investors. For several quarters now, Mr. Cook has suggested that the company has plenty of products in the pipeline, and that some could reach the public this fall or next year.

The company could decide to introduce a cheaper iPhone to spur growth in China and other foreign markets, or even a so-called smartwatch that would compete in a brand-new market of wearable computers. Both of those ideas have long been discussed and considered at the company.

The third quarter is typically a slow time for Apple. That is because the company traditionally introduces a new iPhone model in the fall, so in the summer many shoppers are waiting for the next model to be released.

But sales of iPhones were strong. The company sold 31.2 million iPhones, up from 26 million in the same time period a year ago. It was the most iPhones that Apple had ever sold in a third quarter.

Apple's gross profit margins are closely watched. For the third quarter, Apple's gross margin was 36.9 percent. In April, Apple warned that its gross margin would continue to fall in the fiscal third quarter to between 36 and 37 percent, from 42.8 percent a year ago. Last quarter, gross margin fell to 37.5 percent.

Investors concerned about Apple's growth have punished the company's stock. The stock price has fallen by roughly 40 percent from its peak of $705.07 in September. Shares closed at $418.99 on Tuesday, down 1.7 percent, but gained about 4 percent in after-hours trading.

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This article originally appeared in The New York Times.


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