Apple stock surges as metaverse AR plans revealed

Apple Inc teased its metaverse ambitions on Thursday as CEO Tim Cook talked expansion of the company’s augmented reality apps, prompting strong investor response.

The company has 14,000 AR apps on its App Store, and Cook suggested this number will rise with further investment.

“We see a lot of potential in this space and are investing accordingly,” said Cook, in response to a question about its plans for the metaverse, a broad term that generally refers to shared virtual world environments that people can access via the internet.

Apple analyst Ming-Chi Kuo and Bloomberg have reported Apple plans to introduce an AR headset by this or next year with glasses to follow later. Apple has not yet publicly acknowledged these plans.

The Apple logo is seen at an Apple Store, as Apple’s new 5G iPhone 12 went on sale in Brooklyn, New York, U.S. October 23, 2020. REUTERS/Brendan McDermid

Cook’s comments on Thursday, and quarterly profit and sales topping estimates, helped drive Apple stock up nearly 5% in after-hours trade.

Apple’s services revenue jumped by 24% to $19.5 billion in the just-ended holiday quarter, topping analysts’ estimates of $18.6 billion. The company added 785 million subscribers to its handful of paid services such as for streaming music and playing games, an increase from 620 million a year ago and 745 million last quarter.

Cook separately on Thursday said that Apple’s research and development efforts are focused on the intersection of hardware, software and services.

“That’s where the magic really happens,” Cook said. “There’s quite a bit of investment going into things that are not on the market at this point.”

An AR device could open many opportunities to grow subscriptions. Existing offerings for fitness workouts and video content could grow more attractive through immersive AR experiences.

And as the services and subscribers have grown, Apple’s gross profit margins have jumped above 40%, drawing praise from analysts.

Metaverse-related services, such as AR apps, could flip Apple’s revenue mix, said analyst Neil Shah of Counterpoint Research.

“There is a significant upside to Apple’s services business potentially crossing its iPhone in the next five years,” Shah said.

(Reporting by Danielle Kaye and Paresh Dave; Editing by Kenneth Li, Peter Henderson and Lisa Shumaker)