When it comes to Apple's iPhone X sales, Wall Street got it wrong
Turns out the iPhone X isn't too pricey after all.
That's one major takeaway from Apple's earnings report on Tuesday. The company, which many feared would report dismal iPhone sales and give a soft forecast for June quarter sales, ended up surprising just about everybody -- even Apple executives themselves. iPhone unit sales, while not soaring, held their own (they rose 2.9 percent to 52.2 million). That led Apple to project revenue for the fiscal third quarter that's largely in line with Wall Street's expectations.
And that iPhone X -- which starts at $999, $300 more than the 4.7-inch iPhone 8 and $200 more than the 5.5-inch iPhone 8 Plus -- was the top-selling Apple device every week of the quarter, according to CEO Tim Cook. The iPhone X is the most expensive phone Apple has ever made.
Watch this: iPhone X sales defy rumors
1:18
"We were surprised somewhat that through all of this period of time that the iPhone X winds up as the [best] selling, most popular [device] for every week ... since the launch" in November, Cook said Tuesday during a conference call with analysts.
He wasn't the only one surprised. In the weeks leading up to Apple's results, analyst after analyst cut earnings estimates and warned the iPhone boom times could be over. They based their fears on results from Apple's component suppliers, including Samsung, almost universally warned about weakness in the mobile market.
They were wrong.
"Cook delivers again despite rampant fears," noted GBH Insights analyst Daniel Ives, who last week warned Wall Street was in "full panic mode" ahead of Apple's results. On Tuesday, he said that Apple's forecast for the June quarter "was much better than feared" and would be a "major relief" for investors.
For the current quarter, which ends in June, Apple said it expects sales of $51.5 billion to $53.5 billion, with the midpoint higher than the $52 billion expected by analysts, according to a poll by Yahoo Finance.
As Steven Sinofsky, a former Microsoft executive who's now a partner at VC firm Andreessen Horowitz, tweeted: The "analyst community once again demonstrates little understanding of how supply chains work, especially when made up of public (China) companies."
Cook took a triumphant -- yet almost scolding -- tone during his call with analysts, repeatedly talking about his confidence in Apple's future and its iPhone franchise, which accounts for nearly two-thirds of Apple's revenue. At one point, he provided a laundry list of accomplishments that makes him "very bullish on Apple's future" -- including dramatic growth in the services business, a "huge" installed base of active devices, and "the best pipeline of products and services [Apple's] ever had.
"Since we split the line with the launch of iPhone 6 and 6 Plus back in 2014, this is the first cycle that we've ever had where the top of the line iPhone model has also been the most popular," Cook noted, firing back at Wall Street worries the iPhone X is too expensive to sell in high numbers.
Still, that doesn't mean Apple's iPhone sales will start soaring again.
Loup Ventures analyst Gene Munster expects iPhone shipments to remain flat or rise up to 5 percent each year over the next four years.
Apple's forecast for the June quarter "suggests that the iPhone business is becoming more stable, albeit at a lower growth rate," Munster said. "While investors will always have some anxiety regarding the quarterly iPhone number, the results and guidance suggest we've entered a period of greater visibility in the iPhone business."
Apple increasingly will rely on its services business -- which includes the App Store, Apple Music, iCloud and Apple Pay -- and other operations to bolster its overall results. And one day, services could even become more important to Apple -- and Wall Street -- than the iPhone.
We've "been seeing Apple shifting from a device company to a services company," said Michael Obuchowski, chief investment officer for Boston-based Apple shareholder Merlin Asset Management. "Many analysts will continue to be obsessed with the number of iPhones sold in a quarter, but increasingly iPhones will become just part of a growing number of 'devices' designed specifically to access Apple Services."
Follow the Money: This is how digital cash is changing the way we save, shop and work.
Rebooting the Reef: CNET dives deep into how tech can help save Australia's Great Barrier Reef.
https://www.cnet.com/news/apple-second-quarter-iphone-x-sales-show-wall-street-analysts-got-it-wrong/