Apple’s revenue forecast fell short of analyst projections, casting a shadow over stronger-than-expected sales of iPhones during the recent holiday quarter.
Sales in the three months through March will be $51.5 billion to $53.5 billion, the Cupertino, California-based company said in a statement. The average estimate of analysts in a Bloomberg survey was $53.8 billion. Apple expects a gross profit margin of 38 percent to 39 percent in the period, while analysts forecast 38.7 percent.
“We were surprised by the strength of iPhone 7 Plus where we were actually short of supply throughout the quarter. We’ve been able to come into supply-demand balance in January,” Chief Financial Officer Luca Maestri said in a telephone interview.
Explaining the forecast for the current quarter, the CFO said a strong U.S. dollar was “a bit of a problem for Apple,” like other U.S. companies with significant business overseas.
Introduced in September, the iPhone 7 represented a modest update to its predecessor, the 6S, adding water resistance, an improved camera, battery life and processor while retaining similar styling. Expectations are mounting for a more significant upgrade to Apple’s flagship product later this year, which is the 10th anniversary of the iPhone’s launch.
Apple reported earnings of $3.36 a share in the three months through Dec. 31. Revenue rose 3.3 percent to $78.4 billion. Analysts forecast profit of $3.22 a share on revenue of $77.3 billion, according to data compiled by Bloomberg.
Apple said it sold 78.3 million iPhones in the final quarter of 2016, generating $54.4 billion in revenue in the period. The average sales price for each iPhone was $695, compared with $691 a year earlier. Analysts had forecast iPhone unit sales of 76.3 million and an average selling price of $688, according to a Bloomberg News survey.
Global smartphone sales were largely unchanged in 2016, after years of growth, according to researcher IDC. That puts pressure on Apple because the iPhone generates almost two-thirds of Apple’s revenue. Chief Executive Officer Tim Cook’s response has been to drive adoption of services such as Apple Music, iCloud and the App Store. Services revenue again represented the fastest growing segment, with sales jumping 18 percent to $7.2 billion in the holiday quarter.
Sales in China fell 12 percent to $16.2 billion, the only region to see a decline. Apple said it generated 64 percent of its revenue overseas in the holiday quarter.
Cook has also discussed the potential of augmented reality and the possibility of major acquisitions to expand. Apple is working on digital glasses that may use augmented reality, people familiar with the matter said in November.
The presidency of Donald Trump may spark tax reforms which make it cheaper to repatriate cash reserves held outside the U.S.. That could free up more of Apple’s cash to spend on takeovers. Apple had cash reserves of $246.1 billion at the end of 2016, it said on Tuesday.
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