Apple Posts Strong Quarter on iPhone Sales, Services Growth

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Apple CEO Tim Cook

The services division, which includes sales from iTunes and Apple Music, reached $9.5 billion in revenue during the quarter that ended in June.

Apple has turned a typically quiet sales period into a strong financial performance. 

The iPhone maker reported Tuesday that it earned $2.34 per share during its fiscal third quarter and brought in quarterly revenue of $53.3 billion, up 17 percent year over year. iPhone sales, what many analysts use to gauge the health of the company, were 41.3 million units during the period.

The company beat expectations in all major areas. Wall Street was looking for quarterly earnings of $2.18 per share and revenue of $52.4 billion. On the device front, analysts were expecting iPhone sales of 41.6 million.

Apple CEO Tim Cook noted in a statement that it was "Apple's best June quarter ever and our fourth consecutive quarter of double-digit revenue growth."

One especially strong area for the company during the period was its services division, which brought in revenue of $9.5 billion, up 31 percent year over year. Analysts were expecting the division to reach $9.22 billion during the same period.

Cook said in early 2017 that he wants to see revenue from the services division double by the end of 2020, a goal that would push it above $14 billion in quarterly revenues. To do that, the company has been investing heavily to keep users in its ecosystem, whether through subscription service Apple Music or marketplaces like iTunes and the App Store. It's a key reason behind Apple's investment in original programming through the studios division it set up last year with Sony veterans Zack Van Amburg and Jamie Erlicht. Though details are scarce about how Apple plans to distribute this programming, that hasn't stopped executives from buying up a number of projects, including Jason Momoa starrer See and Emily Dickinson coming-of-age series Dickinson

In addition to bulking up on television shows, Apple has also followed Netflix into the race to lock down talent and has signed a multiyear deal with Oprah Winfrey. Asked about the deal during a call with investors, Cook noted that Apple "could not be happier" about working with the OWN CEO: "We think that we can do some great original content together."

He then elaborated a bit further on the hiring of Van Amburg and Erlicht. "As you know, we hired two highly respected television executives last year, and they have been here now for several months and have been working on a project that we're not really ready to share all the details of it yet, but I couldn't be more excited about what's going on there," he said.

Cook continued that he sees the catalyst of those efforts as the changes in consumption habits. "Cord-cutting, in our view, is only going to accelerate and probably accelerate at a much faster rate than is widely thought," he said, noting growth in Apple TV sales and streaming video subscriptions on the platform. Those signs, he added, "point to dramatic changes speeding up in the content industry. So we're really happy to be working on something, but just not ready to talk about it in depth today." 

During the call, Cook also went into greater detail about the services division as a whole. During the quarter, paid subscriptions from Apple or third-party apps surpassed $300 million, up 60 percent from last year. The number of apps that offer subscriptions via Apple have grown to nearly 30,000. Apple Music, meanwhile, saw 50 percent growth year over year.

"Given the momentum that we're seeing across the board, we feel great about our current services, but obviously we're also thrilled about our pipeline that will have some new services in it as well," he said. "With the combo of these, we feel great about hitting our objectives and maybe even doing a little better."

Next quarter, Apple expects to bring in revenue of $60 billion to $62 billion, more than the $59.4 billion outlook that analysts are anticipating. 

Apple shares closed the day flat at $190.29. Shares were up more than 3 percent during after-hours trading.