Apple Inc (AAPL.O) painted a rosy picture for its new iPhones as it reported quarterly results on Tuesday, but investors were more focused on the company’s next test: topping last year’s record holiday sales.
Shares of the world’s most profitable company initially rose 3 percent in extended trade after Apple beat Wall Street’s sales and profit forecasts, but the gains largely evaporated later.
In the world’s most important market for smartphones, Apple’s sales in Greater China in its fourth fiscal quarter nearly doubled from a year ago to $12.52 billion, accounting for nearly a quarter of its total revenue.
“We continue to have wonderful success there,” Apple’s chief financial officer, Luca Maestri, told Reuters, adding that Apple now has 25 stores in China and is opening a new one roughly every month.
But China sales dipped from the fiscal third quarter, when Apple notched $13.2 billion in revenue there. The sequential decline is important as many analysts believe China is poised to replace the United States as Apple’s biggest market.
Analyst Ben Bajarin of Creative Strategies said as the Chinese market matures, it is beginning to show spikes around the holidays and slumps before the release of a new phone, as in the U.S. market. “The seasonality in China is really a new wrinkle,” he said.
Apple, the world’s largest company by market value, said it sold about 48.05 million iPhones worldwide in its fiscal fourth quarter ended Sept. 26, slightly below analysts’ average forecast of 48.72 million, according to a poll by Fortune magazine.
For the current quarter, which will include a full three months of sales of the new iPhone 6s and 6s Plus models, Apple forecast revenue between $75.5 billion and $77.5 billion. The company’s generally conservative forecast was in line with Wall Street’s average estimate of $77.17 billion, according to Thomson Reuters I/B/E/S.
“The street was fearing soft guidance and instead got a good December outlook,” said Daniel Ives, an analyst at FBR Capital Markets.
Morningstar analyst Brian Colello said the forecast was slightly below expectations but investors were pricing in a worse outcome, which was why the stock initially rose after hours.
Boosted by a new pink or ‘rose gold’ color option, Apple posted record sales of its latest iPhones in the first weekend that they hit stores in late September. The fiscal fourth quarter included only two days of sales of the new iPhones.