Technology giant Apple Inc. lost more than $60 billion in market value in just three minutes on Tuesday. The steep drop came shortly after the company released its quarterly earnings report. Most would think that the earnings announcement must have been dire to cause such a precipitous decline, but surprisingly this is not the case. Apple reported increases in both profit and revenue for the quarter.
For the fiscal third quarter, Apple reported that revenue rose 33 percent and profit increased 38 percent when compared with the same quarter a year ago. Profit was recorded as $10.7 billion for the third quarter and the company reported that it put away more than $202 billion in cash for future needs. Many companies would be proud to release those kinds of results in their quarterly earnings call.
So why did the company’s stock fall after the earnings announcement? It was mainly due to the company’s reported sales of the iPhone and speculation about the company’s sales of the Apple Watch. Although the company reported that sales of the iPhone were up 35 percent over the same quarter in the previous year, the sales numbers missed the expectations of polled Wall Street analysts. Analysts were also alarmed that the number of Apple Watches sold in the quarter were far below expectations.
Apple reported selling 47.5 million iPhone units in the quarter, a third quarter record. However, analysts expected the company to sell about 50 million units. While year-over-year sales of the device increased 35 percent for the quarter, this was lower than the 40 percent growth of the previous quarter and the 46 percent growth seen two quarters earlier. Morgan Stanley Analyst Katy Huberty said in a statement, “While total company and iPhone revenue growth accelerated in the June quarter, iPhone units missed expectations.”
Because these two sales figures were lower than expected, the company’s stock took a beating in after-hours trading. Investors relying on analysts’ predictions were disappointed that the company did not see more growth during the quarter, despite the increases in revenue and profit. Apple has routinely beat earnings estimates over the last four quarters, setting high expectations for this quarter that the company just wasn’t able to meet.