Apple's third quarter results beat expectations, reveal challenges

For the first time in years, the iPad saw a resurgence — likely due to the new price options and unique 120Hz displays. (Source: ArsTechnica/Andrew Cunningham)

Apple's third quarter financial reports show strong performance of the iPad and online Services. Meanwhile, revenue in the Greater China region dipped by 10%, highlighting one of the company's future challenges.

Douglas Black, Published 08/02/2017

Despite much ado about consumers holding out for the iPhone 8 and increased expectations for a "supercycle" of profit in Q4 of this year, Apple seems to be doing just fine. Apple has formally released their third quarter results with the Cupertino company beating their own expectations in a big way. Some of the bright spots of growth were Services and, somewhat surprisingly, the iPad.

Apple sold 100,000 more Macs this quarter than last, and iPhone sales were up on-year as well, but the real star of hardware was the iPad. With iPad revenue at US$4.9 billion, sales measured 11.4 million unit this quarter — meaning Apple sold more than twice as many iPads as MacBooks. Though since their initial splash as a disruptive technology tablets have faced a shrinking market market, it seems that Apple has found the cure: arguably the most innovative and compelling product Apple released this year, the iPad's new 120Hz display and pen-responsiveness makes it an attractive offering — especially at a price just a fraction of a MacBook's.

Growth in Services (an area that other blue-chip tech companies are banking on as well) measured in at 22% on-year, which CEO Tim Cook was expectedly happy about, according to CNBC. Cook boasted that the revenue from Apple Music, the App Store, and the rest of their service portfolio alone was enough to place Services on the Fortune 100 list if it were its own company. As a result, the company's total revenue grew 7% from last year, with shares yesterday hitting US$157 in after-hours trading.

The one area of concern with Apple was its performance in China. While the company reported US$8 billion in revenue from China, Hong Kong, Macau and Taiwan, they saw a 10% year on year drop in the region. Apple faces pressure from home-grown competition like Huawei, but they also have recently acquiesced to pressure from the Chinese government to remove anti-censorship apps from the Apple Store as well as store user data locally in the mainland (under PRC control). Should Apple decide not to cooperate with Chinese authorities, they face losing access to the lucratively large market.