Apple reports best quarter ever: $78.4B revenue, 78M iPhones sold
The huge quarter follows three consecutive quarters of year-over-year sales declines.
After three consecutive quarters of year-over-year sales declines, Apple announced its biggest quarter ever. The company beat revenue and earnings expectations, selling more than 78 million iPhones.
Apple revenues came in above the high end of guidance. The company reported revenue of $78.4 billion vs. an expectation of $77.25 billion. It sold 78.2 million iPhones vs. 76 million expected.
All product lines posted increases. Across the board it was Apple’s best quarter; however, the iPad was the weakest of the product lines in terms of analyst expectations. Here are numbers:
- iPhones: 78.3 million units, $54.4 billion in revenue
- iPad: 13.1 million units, $5.5 billion in revenue
- Macs: 5.4 million units, $7.2 billion in revenue
- Services (including Apple Pay, Apple Care): $7.2 billion in revenue
- Other (including Apple TV, Apple Watch, Beats products): $4 billion in revenue
At the end of the December quarter, Apple had $241 billion in cash and marketable securities. Gross margins were 38.5 percent.
International sales were roughly 59 percent of total revenue. The company said it had net profit of $18.4 billion. The Americas, Europe and Greater China were the company’s top markets, in that order.
Notes from the earnings call:
CEO Tim Cook ticked off record sales across Apple product categories: iPhones, Macs, Apple Pay, Music, Watch, services revenue. Among other stats mentioned, Cook said there are more than two million small businesses using Apple Pay (some via third-party partners).
He talked about smart home automation and integration with HomeKit and Siri. He also said there are now more than 2.2 million apps.
Cook said Apple’s services revenue “is going to be the equivalent of a Fortune 100 company this year,” and the company hopes to double it in the near term.
The iPhone 7 was the best selling phone in China during the quarter. Apple was the most popular US brand during Singles Day in China. iPhone 7 Plus is the most popular Plus model Apple has had.
CFO Luca Maestri: There was double-digital iPhone growth in both developed and emerging markets. iPhone 7 Plus has seen extremely strong demand and has a 99-percent customer satisfaction rating, according to third-party research.
Services revenue increased 18 percent YoY to more than $7 billion. App Store revenue growth was 43 percent YoY. Apple retail stores also saw significant growth globally.
Apple generated its highest-ever Mac quarterly revenue. The iPad sold 13.1 million units. Apple tablets have 85 percent of the market for tablets above $200.
Selected analyst questions:
Content producer acquisition: Cook was asked about whether the company would make a major content-producer/distributor acquisition if Apple’s $241 billion in cash (mostly overseas) were repatriated. Cook sounded like he was very open to a content-producer acquisition. Cook said that no acquisition was off the table or “too large.” The issue is whether there would be a strategic fit. Apple is “putting its toe in the water” and doing some original content for Apple Music and “learning from that.”
Services business: App store revenue is driving most of the growth. “It’s truly a global platform.” We think that the app store will continue to grow. Apple is the leader in digital music. Music business has come back to growth.
iCloud storage is growing very quickly. Apple Care business growing well. Most services revenue is driven by the installed base.
Lots of questions about China, the outlook for China growth and exchanges rates.
On the Qualcomm litigation: Cook said that suing Qualcomm was a last resort and a result of Qualcomm being unreasonable in its royalty negotiation and withholding $1 billion in payments owed to Apple.
No one asked about the White House immigration ban or its impact on Apple’s business or workforce.