When Apple had warned earlier this month that the iPhone sales were expected to be lower than estimates for the quarter ending December, it did come as a shock. Which is why the latest earnings numbers, formally released now by the Cupertino based company, don’t come as a shock anymore. We try to make sense of all the numbers that formed the very foundation of the financial results, for its fiscal 2019 first quarter ended December 29, 2018. This could, in many ways, be the most critical quarter in the recent memory for Apple, as this could shape the direction and decisions the company takes over the next few quarters. We try to make sense of all the numbers.
Apple reported revenue of $84.3 billion, a decline of 5 percent from one year ago. The quarterly earnings per diluted share was $4.18, which is up 7.5 percent. Apple had, through CEO Tim Cook’s message earlier this month, indicated that this was also because of the slowdown in the Chinese markets at the moment, apart from the admittance that the high prices of the current iPhone line-up were the reasons for this dip.
Apple also confirmed the worst fears—iPhone revenue for the quarter was down 15 percent. This despite the fact that CFO Luca Maestri confirming that Apple has an active installed base of 900 million iPhones globally, as part of 1.4 billion active iOS devices clocked at the end of 2018. This is because the current iPhone line-up, which includes the iPhone XS and the iPhone XS Max, is priced significantly higher than most of the alternatives. The iPhone XR also wasn’t exactly the affordable iPhone many had expected it to be, which perhaps hurt consumer sentiment. There is also the slowdown in the upgrade cycle, and a lot of iPhone users are holding on to the iPhones that they already own.
While Apple now does not share specific numbers about the sales of individual iPhone models, the company did confirm that the iPhone XR remains the most popular iPhone in terms of sales, followed by the iPhone XS Max (the largest iPhone Apple has ever made) followed by the iPhone XS. Though the company did not mention the older iPhones, we suspect a lot of buyers did still mop up the remaining stocks of the iPhone X at perhaps discounted prices, which took away the sales from the newer but more expensive iPhones.
The battles in China continue. Apple reported revenue of $13.17 billion in Greater China for the quarter, which is 27 percent lesser compared to the same time an year ago. The economic slowdown, the higher price tags of the new iPhones and the Chinese smartphone makers such as Huawei who sell rival phones at lower price tags, all combine to give Apple a tough time in that region.
But the disappointing sales of the iPhone have not impacted the other products that Apple also sells. The company confirmed that the revenues from iPad sales were up 17 percent against the same quarter an year ago. The revenue from the sales of the Mac computing device line-up was also up by 9 percent, despite the company facing criticism for the higher prices of the MacBooks, particularly the newly refreshed MacBook Air. The ‘Others’ category, which includes the Apple Watch, the AirPods and the HomePod smart speaker also saw a revenue increase of 33 percent in the quarter. This could see an even bigger boost in the quarter ending 31 March, if Apple were to introduce the much expected refresh of the AirPods, referred to as the AirPods 2, in the current quarter.
The shining light for Apple continues to be its services division, a constant stable earner for the company, quarter after quarter. This includes businesses including iCloud, App Store and iTunes, Apple Music subscription service and Apple Pay, to name a few. The revenue from the services category $10.8 billion in revenue for the December quarter. It will be interested to see whether the rumoured video streaming service, expected to compete with the likes of Netflix and Amazon Video, is also added to the services category.
Apple has predicted revenue for the quarter ending 31 March, around $55 billion to $59 billion, which would indicate a drop of approximately 3.4% year-on-year. "The macroeconomic environment, particularly in emerging markets, will continue to be there," Luca Maestri explained, during the earnings call.