Apple beats analysts' iPhone expectations with sales of 39.27M units

Apple (NASDAQ: AAPL) said it sold 39.27 million iPhones during its most recent quarter, more than the 33.79 million units it sold in the year-ago quarter and above analyst expectations of around 37.8 million unit sales.

Click here for Apple's quarterly iPhone and iPad sales since the iPhone was first introduced in 2007.

Apple's fiscal fourth quarter ended Sept. 27. Apple's new iPhone 6 and 6 Plus went on sale Sept. 19. Apple said it sold more than 10 million units of the iPhone 6 and 6 Plus after the gadgets' debut sales weekend, surpassing the 9 million units Apple sold last year during the opening weekend of the iPhone 5s and 5c. Importantly, the company's results don't include sales of Apple's new iPhone in China; the company began selling the device on Oct. 17 in China, the world's largest smartphone market, and thus results from those sales will show up in Apple's current quarter.

"Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus," Tim Cook, Apple's CEO, said in the company's earnings release.

"Apple generated over $100 billion of revenue from iPhones in Fiscal 2014. Despite the already large iPhone revenue, Apple was able to post an incredible 21% annual growth this quarter," wrote BTIG analyst Walter Piecyk.

Apple said its iPhone average selling price (ASP) increased by $42, which the company was partly driven by sales of the more expensive iPhone 6 Plus. Piecyk said he raised his iPhone ASP to $609, and noted that "the company reported its first y/y increase in iPhone ASP since the iPhone 4S launch in 2011."

As for the popularity of the iPhone 6 (which offers a 4.7-inch screen) vs. the iPhone 6 Plus (which offers a 5.5-inch screen), Apple's Cook said it's unclear how demand for the different phones is playing out. "What our current sell-through looks like is our current supply," Cook said during the company's conference call, declining to provide details. He did say that he expects the two models to sell differently in different countries across the world, though he didn't expand on those comments.

Apple's net income in the period clocked in at $8.5 billion, up from the $7.51 billion the company reported in the year-ago. Apple's revenues in the quarter reached $42.1 billion, again up from the $37.5 billion the company reported in the year-ago period and above the $40 billion that analysts had expected.

Importantly, in the coming quarter Apple said it expects revenues of between $63.5 billion and $66.5 billion--at the high end of the $63.5 billion that analysts had expected.

However, Apple's success in iPhones is being undercut by continued troubles in the company's iPad division. In its most recent quarter Apple said it sold 12.3 million iPads, down from the 13.1 million iPads it sold in the same quarter a year ago.

Despite the numbers, Apple's Cook reiterated his belief that the overall iPad opportunity is significant, if not in the current quarter than in the coming months and years.

"iPad has a great future," Cook said during the company's conference call. "I'm very bullish where we can take iPad over time."

Others disagreed. "We are slashing our iPad estimates as we have effectively given up on that segment's return to growth," wrote BTIG's Piecyk. "We previously thought that the push by wireless operators to drive higher usage products into their customer's hands would stimulate growth in iPads. As a result, our estimates were likely higher than our peers in this segment. However, the reported numbers of Apple are not reflecting any impact or support of our thesis, so we are abandoning it. The new iPads launched last week also did not seem compelling enough to re-accelerate growth."

In other Apple news, the company announced an accounting change that may allow the company to keep its Apple Watch sales secret. Starting this quarter, Apple said it will put its Apple Watch with its iPod, Apple TV, Beats headphones and speakers, and other accessories into a new "other products" category. The move means the company won't have to report unit sales like it does with its iPhones and iPads. Cook said such sales information is valuable to rivals and Apple may choose to keep it secret.

The release of Apple's earnings caps a busy few weeks for the company. Early last month, Apple announced its two new iPhones along with its new Apple Watch, set to go on sale sometime early next year. A few weeks after initiating sales of its new iPhone 6 and 6 Plus, Apple announced its new iPad Air 2 and iPad mini 3. And then this week the company commercially launched its new Apple Pay service, which allows iPhone users to make payments both online and at participating retail stores (via NFC technology) with their Touch ID-enabled phones.

In August, just before the launch of its new iPhones, Apple commanded a 42 percent share of the U.S. smartphone market, according to research firm comScore. That put Apple in the lead in the United States, ahead of Samsung (28.9 percent) and LG (6.7 percent). Globally, Apple owned 11.9 percent of the smartphone market in the second quarter, according to research firm IDC, behind market leader Samsung with 25.2 percent market share. Huawei came in third, according to IDC, with a 6.9 percent share of the global smartphone market in the second quarter.

For more:
- see this Apple release
- see this Bloomberg article
- see this Wall Street Journal article
- see this MarketWatch article

Special Report: Wireless in the third quarter of 2014

Related Articles:
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Article updated Oct. 20 with details from Apple's quarterly conference call with investors and on Oct. 21 with details from BTIG and Bloomberg.

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