Apple Shreds Profit Estimates (Update)

Apple ( AAPL) boosted fourth-quarter profit by 26% on strong iPhone sales and higher margins.

But the company's normally conservative forecast for the current quarter seemed to held more in check than usual, with the company noting a challenging environment ahead for financial forecasting.

Apple said fourth-quarter net income rose to $1.14 billion, or $1.26 a share, compared with $904 million, or $1.01 a share, a year earlier.

Revenue rose to $7.9 billion from $6.22 billion in the same period last year.

Analysts had predicted revenue of $8.05 billion and earnings of $1.11 a share.

Gross margins rose to 34.7% from 33.6% a year earlier.

Buoyed by Apple's performance, traders pushed the stock nearly 14% higher in after-hours trading to $104.21.

Wall Street was eagerly awaiting Apple's results for an insight into consumer confidence, although CEO Steve Jobs refused to make any predictions on the state of the economy during Tuesday's conference call.

"We're not economists, your next-door neighbor can accurately predict what will happen as likely as we can," he said. "If the economic downturn does affect Apple customers, they are more likely to delay their purchase than to switch."

Apple's extra-conservative forecast for the current quarter nonetheless indicates that consumer spending remains tricky.

"Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter," said Peter Oppenheimer, Apple's CFO, in a statement.

Analysts were expecting the company to earn $1.65 a share on revenue of $10.57 billion.

For the first quarter, Apple said it expected earnings of $1.06 to $1.35 a share on revenue of $9 billion to $10 billion.

Even Apple's fourth-quarter Mac sales, although strong, still dipped below analyst expectations.

Apple said it shipped 2.6 million Macs, slightly below consensus expectations of 2.7 million, representing revenue growth of 17%.

Jobs also reiterated his commitment to Apple's current Mac pricing during Tuesday's call. Prior to the launch of a new family of MacBooks last week, there had been speculation that the company would unveil an $800 device, which did not happen.

Despite stiff competition from companies such as Dell ( DELL), Hewlett-Packard ( HPQ), and Lenovo, which already offer mini-laptops for $500 and below, apple lowered the cost of its cheapest MacBook to just under $1,000.

"We don't know how to make a $500 computer that's not a piece of junk," said Jobs, in response to an analyst's question. "Our DNA would not let us ship that."

Jobs was equally bullish on the subject of apple's iPhone, which sold well during the fourth quarter.

The company shipped 6.9 million iPhones, way ahead of average estimates of 4.5 million, prompting Jobs to fire a shot across the bows of Research In Motion's ( DELL) BlackBerry device.

"Apple outsold RIMM last quarter and this was a milestone for us," he said, adding that Apple is now the world's third-largest mobile phone supplier.

The company's iPod was more problematic, however. While the company sold 11.1 million of the devices during the quarter, it appeared that cost cuts bit into iPod revenue, which rose only 3% from a year ago and was down 1% sequentially, despite the back-to-school quarter.

Shares of Apple were up 4.1% in recent after-hours trading to $95.25.

More from Technology

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Some Companies Are Already Feeling the Effect of GDPR

Some Companies Are Already Feeling the Effect of GDPR

Experts Break Down GDPR Risks for Investors

Experts Break Down GDPR Risks for Investors

Netflix Ready to Surpass Disney as America's Most Valuable Media Company

Netflix Ready to Surpass Disney as America's Most Valuable Media Company