Apple sales: why did shares dive after 'record' results?

Apple last night reported "record" sales in what chief executive Tim Cook described as an "amazing" past quarter.

The company posted revenues of $49.6bn and earnings of $1.85 per share, with sales of its flagship iPhone up 35 per cent, all of which were ahead of the consensus expectations in the weeks leading up to the announcement. By any measure this might seem like great news for investors.

But no: the company plunged in after-hours trading and at one point it had shed more than $60bn as shares dived 8 per cent, although they have recovered somewhat and are currently set to open around 5 per cent down.

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So what has caused investors to take fright?

1. Expectations increased

While a consensus of analysts from Thomson Reuters had pointed to earnings of $1.81 a share on sales of marginally above $49bn, positive soundings and no small amount of hubris saw expectations surge immediately before the announcement. Market Watch had indicated on Tuesday morning that investors should look for earnings of $1.90 a share, which was not reached.

2. Apple Watch concerns

People have been worried about the Apple Watch for a while as figures coming out of America have suggested a sales slump. The company didn't exactly go out of its way to calm these fears by refusing to allocate the new product its own line in the report and instead merely alluding to its sales performance.

Numbers for the watch are hidden with an 'other' category that also includes accessories and audio equipment maker Beats, which rose by around $1.3bn. The Guardian quotes Cook saying elliptically that it would not be "an inaccurate thing" to extrapolate watch revenue, making it a $1bn+ product. But this will still have disappointed those who had been hoping for closer to double that amount.

3. Has iPhone peaked?

iPhone sales were strong, up 35 per cent year on year, but according to the Wall Street Journal this disappointed some investors. Sales of the phones, which always taper down through the year following new launches in the autumn, were also down by 23 per cent compared to the previous three months, a steeper rate of decline than in recent times.

As the Journal says the product is the engine room of Apple sales and accounts for two-thirds of income, so "any signs that iPhone growth is reaching a peak is a major cause of concern".

4. China scrutiny

Amid fears of a broader slowdown, sales in China, which is now the largest smartphone market in the world, are keenly watched. Sales were up from last year but down considerably on the previous quarter by around 20 per cent, the Daily Telegraph notes, which will set some nerves jangling.

5. Is growth easing?

According to one analyst quoted by CNBC, guidance on what is going to happen in the current quarter is "really the issue". Expectations had been for sales of $51bn for the three months, which is at the very top end of Apple's indicative range of $49bn to $51bn.

Given the bullish rise in recent months – Apple is up 40 per cent in the past year – this might give the sense that growth is easing and prompt investors to bank gains.