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Apple sees iPhone sales recovery ahead despite worst decline

Apple shares have surged after the iPhone maker raised its forward guidance amid early signs of a recovery in premium handset sales.

The tech firm said that while iPhone sales declined at their sharpest rate in the second quarter of its financial year – by 17% on a year earlier – a resurgence of sales in China towards the end of the period gave it more confidence.

It reported iPhone revenue of $ 31bn between January and March – a figure that was still above Wall St estimates while its main area of growth, from services such as Apple Music and the App Store, hit $ 11.45bn – a rise of 16%.

Total revenue came in at $ 58bn, a decline of 5%, reflecting the weaker iPhone sales.

Apple Card
Image: Apple hopes its planned credit card will be a further driver of services revenue

Services has become a core metric for investors amid the slowdown in iPhone sales of the past year.

It has been driven by concerns its top phones are too expensive in a more crowded market and the fact that more customers are holding on to older models for longer.

Apple introduced price cuts in China in a bid to help models shift – aided by lower local taxes – and also introduced trade-in programmes at its stores in several countries including those in the US and UK.

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The company said an iPhone improvement in March helped make it more optimistic for the third quarter.

Apple Watch series 4
Image: Apple does not give breakdowns on how many devices it has sold including the Apple Watch series 4

It forecast revenue just below $ 55bn at the top of a new range – beating earlier average estimates among analysts by $ 3bn.

Chief executive Tim Cook told the Reuters news agency: “As we look at the iPhone results through Q2, the results were stronger on a year-on-year basis for the last few weeks of the quarter.

“We also saw a similar result in China. These, along with the continued success with wearables and so forth, give us some confidence that things are getting a bit better.”

Shares were more than 5% up in after-hours trading following the release of the numbers.

Apple, which has currently lost its crown as the most-valuable listed company to Microsoft, saw its shares fall almost 2% in regular trading as the market was spooked by a weaker-than-expected performance by Alphabet, Google’s parent, in its fiscal first quarter.

Apple has moved to bolster its offering to make it less dependent on iPhone sales.

Last month, it revealed a new credit card and subscription services for news, television and gaming.

Only the news subscription is currently available to purchase.

Apple CEO Tim Cook speaks during a product launch event on September 12, 2018, in Cupertino, California. - New iPhones set to be unveiled Wednesday offer Apple a chance for fresh momentum in a sputtering smartphone market as the California tech giant moves into new products and services to diversify.Apple was expected to introduce three new iPhone models at its media event at its Cupertino campus, notably seeking to strengthen its position in the premium smartphone market a year after launching
Image: Apple CEO Tim Cook believes iPhone sales in China are improving

Mr Cook told investors: “Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record.

“We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services.

“We’re looking forward to sharing more with developers and customers at Apple’s 30th annual Worldwide Developers Conference in June.”

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