What Apple’s earnings tell us about the iPhone 8 – CNET

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The iPhone 7 and 7 Plus may see it’s future sibling sooner than many expected. 

Sarah Tew/CNET

Apple’s next iPhone may arrive on time after all. 

Maybe. 

Going into Tuesday’s earnings report, most expected Apple to delay the launch of its next flagship iPhone, with rumors calling for an October release date, if not later. But the normally conservative Apple surprised everyone by offering a cheery forecast for the current quarter, with revenue ranging from $49 billion to $52 billion, above Wall Street’s forecast of $49.2 billion. 

That forecast is important because it suggests that some sort of new iPhone will launch in the period, which runs until the end of September. Otherwise, there’s no way its existing product line could generate those numbers, which represent an increase over the $46.9 billion it posted a year earlier. 

“There’s simply no way to achieve the kind of growth their guidance suggests without that,” said Jan Dawson, an analyst at Jackdaw Research.

The sentiment was enough to drive the stock to an all-time high in after-hours trading on Tuesday. It’s up 5.7 percent to $158.57 in pre-market trading on Wednesday morning. 

CEO Tim Cook teased only an “exciting fall” during a conference call on Tuesday, but clammed up when an analyst asked directly about his thoughts on a new iPhone. “No comment on anything that’s not announced,” Cook said. 

While we may see new iPhones in September, they could be an upgraded version of the iPhone 7 and iPhone 7 Plus, the usual addition of an “S” to its name. Dawson said it would be hard for Apple to hit its revenue forecast without a new high-end iPhone. But the company could still hold back the rumored radically different iPhone 8 in October or later. 

Apple usually schedules an event in early September, so we’re likely just a few weeks away. 

Here’s a breakdown of other notable comments from Cook:

The China issue

Cook took the time to address the controversy over Apple shutting down several virtual private network apps in China, seen by some as the company acquiescing to the government’s request. A VPN is a secure online connection that internet service providers (and government authorities that monitor them) can’t look at.

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Apple CEO Tim Cook wades into the China controversy. 

James Martin/CNET

In this case, Cook said Apple was forced to remove the VPN apps because they didn’t have the necessary license to operate in China. He said Apple has to follow the laws of each country it operates in, even if it doesn’t agree with the principle.

“Hopefully the restrictions we’re seeing are loosened,” he said. “Innovation requires freedom to collaborate and communicate.”

In contrast, Google doesn’t offer its services in China because of censorship issues. 

Cook also dismissed the notion that this was similar to Apple’s fight against the FBI last year, in which the government wanted the company to build a backdoor into its encrypted software. In that case, the law was on Apple’s side, Cook said. 

Autonomous system

Cook struck a bullish tone when it came to autonomous driving and noted that cars represented just the first application. He said Apple was making a big investment in this area and that autonomous systems can be used in a variety of ways. 

“I don’t want to go further than that,” he said. 

He called autonomy “the mother of all AI projects.”

To be fair, he uses that expression a lot

A lot of love for iPhone 7

Despite all the attention for the next iPhone, the current flagship iPhone 7 is still the top seller. Taken together, the iPhone 7 and iPhone 7 Plus saw strong double-digit growth, Cook said, with sales of the Plus unit surpassing the year-ago Plus model. 

Chief Financial Officer Luca Maestri noted that its iPhone average selling price rose to $606 from $595 a year ago. That’s down from its high of $695 set in the first first quarter, when people were clamoring for the Plus model. That’s poised to go back up if the rumors of a $1,000 iPhone are true. 

The company also surpassed the 1.2 billion mark on total iPhones sold. 

iPad for schools

The iPad snapped 13 consecutive quarters of declines with a 15 percent gain in unit sales and a 2 percent gain in revenue. That’s likely helped by the introduction of the new 10.5-inch iPad Pro, but Cook also noted that iPad sales to education rose 32 percent over a year ago. 

He noted that half of the iPads sold in China and Japan were too first-time iPad buyers. 

Apple Watch a hit…we think

Cook also touted the market share leadership of the Apple Watch, although once again stayed mum on any specific numbers. 

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There’s still no real indication of how the Apple Watch is faring. 

CNET

Apple throws Apple Watch sales into the “other” category that includes accessories, Beats headphones and AirPods. 

Still, a 23 percent gain in the “other” category suggests upward trajectory for the wearable. 

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