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Apple highlights record services revenue as iPhone sales fall

For a second quarter in a row, Apple plays up growing services revenues as iPhone sales continue to fall

Apple has highlighted an all-time quarterly services revenue as iPhone sales fell for the third consecutive quarter despite expected benefits from rival Samsung’s Galaxy Note 7 woes.

The company said services revenue grew 24% to $6.3bn for the quarter ending 24 September 2016, which follows a 19% growth to $5.97bn in the previous quarter for Apple’s services, which include Internet Services, AppleCare, Apple Pay and licensing.

This is the second time Apple has separated services from devices in its financial reporting to demonstrate that the company can still make money from people who are not upgrading their devices.

However, revenue of $46.9bn was down by nearly 9% compared with the same period a year ago, while profit was down nearly 19% to $9bn.

Apple said it sold 45.51 million iPhones in the quarter, which – although representing a decline of 5% compared with the same period a year ago – was still higher than the average analysts’ estimate of 44.8 million.

But despite the services revenue growth and the better than expected iPhone sales, investors were unimpressed, sending the share price down 3% in after-hours trading, according to the BBC.

Analysts said Apple’s failure to benefit from Samsung’s scrapping of the Galaxy Note 7, apparently due to an inability to meet demand for new iPhones, and a fall on the gross profit margin to 38% from 39.9% a year ago, possibly contributed to negative investor sentiment.

“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” said Tim Cook, Apple’s CEO.

“We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our services business, where revenue set another all-time record.”

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Luca Maestri, Apple’s CFO, said the company returned $9.3bn to investors through dividends and share repurchases during the quarter. He said Apple has now completed more than $186bn of its $250bn capital return programme.

Apple is expecting a return to growth in the next quarter, forecasting a record-breaking holiday season with revenue between $76bn and $78bn. ... ...

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