18 Key Takeaways From Apple’s First Earnings Call of 2019

Apple yesterday reported its earnings results for the first quarter of the 2019 fiscal year. Apple's CEO Tim Cook and CFO Luca Maestri then went on a conference call with analysts to discuss the results. Key takeaways are below.


  • Revenue of $84.3 billion. For financial details, see our earnings report coverage.
  • 1.4 billion active devices at end of quarter.
  • Apple Music now has over 50 million paying subscribers.
  • App Store set single-day spending record: over $322 million on New Year's Day.
  • 1.8 billion Apple Pay transactions in quarter, more than 2x vs. year-ago quarter.
  • Target, Taco Bell, and Jack in the Box stores in U.S. will accept Apple Pay soon.
  • Apple News now has over 85 million monthly active users.
  • Apple News launching in Canada later this quarter. English and French.
  • Apple's gross margin was 34.3% for hardware products and 62.8% for services.
  • Apple remains on track to double its fiscal 2016 services revenue by 2020.
  • Apple now has 360 million paid subscriptions across its services.
  • Apple expects to surpass 500 million paid subscribers across its services in 2020.
  • Wearables revenue driven by "amazing popularity" of Apple Watch and AirPods.
  • Wearables category is "approaching the size of a Fortune 200 company."
  • 506 Apple Stores across 22 regions at end of quarter.
  • Apple ended the quarter with $245 billion in cash plus marketable securities.
  • Apple to provide update on its capital return program in March earnings report.
  • iPhone XR is best-selling iPhone model, then iPhone XS Max, then iPhone XS.
More coverage:A replay of the conference call is available on Apple's website for a limited time.

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Apple to Announce Earnings Today Following First Revenue Warning in 16 Years, End of Unit Sales Reporting

Apple is set to report its earnings results for the first quarter of its 2019 fiscal year at 1:30 p.m. Pacific Time today.

The quarter began September 30, 2018 and ran through December 29, 2018, according to Apple's fiscal year accounting calendar.

Apple issued a rare earnings warning for the quarter on January 2, its first in over 16 years. The revised guidance is as follows:
  • revenue of approximately $84 billion
  • gross margin of approximately 38 percent
  • op. ex. of approximately $8.7 billion
  • other income/expense of approximately $550 million
  • tax rate of approximately 16.5 percent before discrete items
Apple's initial guidance for the quarter on November 1:
  • revenue between $89 billion and $93 billion
  • gross margin between 38 percent and 38.5 percent
  • op. ex. between $8.7 billion and $8.8 billion
  • other income/expense of $300 million
  • tax rate of approximately 16.5 percent before discrete items
Apple's guidance suggests it will report its second-best first quarter results ever, based on revenue, behind its 2018 record of $88.3 billion:
  • 2015: $74.6 billion
  • 2016: $75.9 billion
  • 2017: $78.4 billion
  • 2018: $88.3 billion
  • 2019: $84 billion

What to Look For

  • Apple's revised guidance suggests it will report its first holiday quarter sales decline since 2001, although it would still be the company's second-best quarter ever in terms of revenue.
  • This is Apple's first earnings report in which it will not disclose iPhone, iPad, or Mac unit sales, a change it announced back on November 1. Apple's financial chief Luca Maestri said Apple may provide qualitative commentary about sales if necessary, so it will be interesting to see how the conference call and question-and-answer session play out.
  • In a letter to shareholders on January 2, Apple CEO Tim Cook disclosed that Apple's revenue will be lower than its original guidance for the quarter, coming in at approximately $84 billion. Apple initially guided for revenue of $89 billion to $93 billion in the quarter on November 1. Look for any potential commentary surrounding the shortfall.
  • Apple's guidance for its second quarter of fiscal 2019, which began December 30 and so far only encompasses the launch of new Smart Battery Cases for the iPhone XS, iPhone XS Max, and iPhone XR. It could eventually include new iPads, a new iPod touch, new AirPods, the AirPower, more. Analysts expect revenue of around $58.9 billion in the second quarter, compared to $61.1 billion in the year-ago quarter.
  • Continued growth of Apple's Services category, including the App Store, Apple Music, iCloud, iTunes, Apple Pay, and AppleCare. Last quarter, Apple's services brought in a record $9.9 billion revenue. Apple has said it is still on target to double its fiscal 2016 services revenue by fiscal 2020. Analysts expect services revenue of around $11 billion in the quarter.
  • Continued growth of Apple's Wearable, Home, and Accessories category, previously named Other Products, including the Apple Watch, Apple TV, HomePod, AirPods, Beats, iPod touch, and accessories—particularly as Apple diversifies revenue beyond the iPhone.
Apple's CEO Tim Cook and CFO Luca Maestri will discuss the company's earnings results on a conference call at 2:00 p.m. Pacific Time today. MacRumors will loosely transcribe the one-hour call as it occurs live.

Tag: AAPL

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AAPL Stock Recoups Losses Incurred After Tim Cook Slashed Apple’s Revenue Guidance

AAPL shares are currently trading above the $157 mark on the intraday market, recouping virtually all losses incurred since Apple CEO Tim Cook slashed Apple's revenue guidance by up to $9 billion for the first quarter of its 2019 fiscal year.


AAPL closed at $157.92 on January 2, immediately prior to Cook revealing the shortfall in an after-hours letter to shareholders, and is now trading just cents below that level. The stock has gradually recovered over the past two weeks since establishing a new 52-week low of $142 on January 3.


Apple originally guided for revenue of between $89 billion and $93 billion in the three-month period ending in December, but revised its estimate to $84 billion due to "fewer iPhone upgrades" than it anticipated, primarily due to "significantly greater" economic weakness than it projected in the Greater China region.

The letter sparked concerns among some investors and analysts that Apple has reached "peak iPhone," especially given Apple's revelation that it will no longer disclose unit sales in its quarterly earnings reports going forward.

While the iPhone accounts for around two-thirds of Apple's revenue, the company has repeatedly touted the continued growth of its services, including the App Store, Apple Music, iCloud, iTunes, and so forth, which combined for a nearly 19 percent increase in revenue on a year-over-year basis in the quarter.

Apple is widely expected to launch a streaming TV service this year that will likely boost the revenue of that category even further.

In his letter to shareholders, Cook said Apple is undertaking and accelerating multiple initiatives to improve its results, including making it simple to trade in a phone at its stores. Back in November, Apple launched a promotion offering up to $100 in extra trade-in credit towards a new iPhone XR or iPhone XS.

AAPL will report its earnings for the first quarter of fiscal 2019 on January 29, followed by a conference call to discuss the results at 2 p.m. Pacific Time.

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Apple Faces Second Class Action Lawsuit Threat Over Failing to Warn Investors About Slowing iPhone Demand

New York-based law firm Bronstein, Gewirtz & Grossman has announced it is investigating whether Apple and certain executives violated U.S. federal securities laws after the company lowered its revenue guidance by up to $9 billion for the first quarter of its 2019 fiscal year earlier this week.


The law firm is conducting the investigation on behalf of AAPL shareholders, with potential for a class action lawsuit, and encourages affected investors to obtain additional information and assist the investigation by visiting its website.

Bernstein Liebhard LLP, another New York-based investor rights law firm, launched a nearly identical investigation of Apple earlier this week.

Apple CEO Tim Cook in a letter to shareholders this week disclosed that Apple's revenue for the quarter just ended will be approximately $84 billion, significantly lower than its original guidance of $89 billion to $93 billion, due to "lower than anticipated iPhone revenue, primarily in Greater China."

Both investigations contrast the positive language that Cook has previously used when speaking about China with the weaker language used in his letter to shareholders this week, in which he said Apple "did not foresee the magnitude of the economic deceleration, particularly in Greater China."
On January 2, 2019, Apple revealed that its revenue for the first fiscal quarter of 2019 would be more than 7% lower than it expected because of "[l]ower than anticipated iPhone revenue, primarily in Greater China, [which] accounts for all of [Apple's] revenue shortfall to [its] guidance and for much more than [its] entire year-over-year revenue decline."

Conversely, on November 1, 2018 CEO Tim Cook stated during Apple's fourth quarter 2018 conference call, that "[o]ur business in China was very strong last quarter. We grew 16%, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there."
In other words, both law firms are investigating whether Apple failed to warn investors about slowing iPhone demand, particularly in China.

AAPL closed at $142.19 on Thursday, down 36 percent from a closing price of $222.22 on November 1, immediately prior to Apple's last earnings report. As a result, Apple's market valuation has plunged from a peak of around $1.1 trillion to under $700 billion, falling behind rivals Amazon, Microsoft, and Google.

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AAPL Opens at $144, Sliding Nearly 10% After Major Revenue Cut and Down 35% Since Early November

AAPL has opened at $144 today on the stock market, with share prices sliding roughly nine percent after Apple lowered its revenue guidance by up to $9 billion for the first quarter of its 2019 fiscal year.


AAPL is down just over 35 percent since closing at $222.22 on November 1, just prior to its last earnings report.

In a letter to shareholders on Wednesday, Apple disclosed that its revenue will be lower than its original guidance for the first quarter of its 2019 fiscal year, coming in at approximately $84 billion. Apple originally guided for revenue of $89 billion to $93 billion in the quarter on November 1.

The letter said lower than anticipated iPhone revenue, primarily in Greater China, accounts for the entire shortfall.

More details to follow…

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Microsoft Passes Apple to Become Most Valuable U.S. Company

Microsoft today surpassed Apple to become the world's most valuable publicly traded company as a result of Apple's continually declining share price, reports Business Insider.

Microsoft has reached a market capitalization of approximately $814 billion, while Apple's is now slightly less.


Apple earlier this year became the world's only trillion dollar publicly traded company, but it lost that status in November and its market cap has steadily declined since then over concerns of weak iPhone sales and its announcement that it will no longer share iPhone, iPad, and Mac sales on a unit basis.

According to Bloomberg, Microsoft's market cap has not previously matched Apple's since mid-2010, eight years ago.

Microsoft's growing cloud business and strong PC sales made Microsoft one of the few tech companies to grow in value following its September quarter earnings results. Apple's valuation, meanwhile, has fallen more than 20 percent since its own earnings results.

Microsoft shares hit a high of $105.94 in intra-day trading, while Apple's have dropped to a low of $170.27. As stock prices fluctuate, Microsoft and Apple are now competing for the most valuable company title with the lead company shifting back and forth.



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Apple Loses Trillion Dollar Company Status Due to 10% Slide on Stock Market Since Thursday

AAPL has dipped below the $200 mark at times today, and is down around 10 percent since Apple's earnings report last week, resulting in the company losing its trillion dollar valuation in terms of market capitalization. As of writing, Apple has a market cap of around $950 billion based on its latest share count.


Apple on Thursday reported revenue of $62.9 billion during the fourth quarter of its 2018 fiscal year, an all-time record for the July-September period, but the good news was overshadowed by Apple's revelation that it will no longer disclose iPhone, iPad, and Mac sales on a unit basis starting next quarter.

The news has sparked concerns among some analysts and investors that Apple may have something to hide, as iPhone unit sales in particular were essentially flat last quarter and could begin to decline in upcoming quarters.

Apple's financial chief Luca Maestri said unit sales are "not particularly relevant for our company at this point," as they are "not necessarily representative of the underlying strength of our business." He added that Apple may provide qualitative commentary related to unit sales if the info is valuable to investors.

AAPL is also being dragged down by a questionable report claiming Apple has informed its suppliers to halt plans for additional production lines dedicated to the iPhone XR due to "disappointing demand" for the smartphone.

Not everyone believes Apple's decision to stop reporting unit sales is a bad one. Apple bull Brian White at Monness Crespi Hardt believes the change "makes perfect sense" as Apple's success is "increasingly driven by an ecosystem of product and services on Planet Apple," including rising ASPs.

Apple analyst Gene Munster of Loup Ventures also believes the change will be "a good thing for Apple investors," as "the new reporting method will force the Street to think about Apple's business as a stable and growing service, which should yield a higher earnings multiple in the long run."

AAPL is currently hovering around $199-$201 on the intraday market, down from a closing price of $222.22 on Thursday.

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Apple Now Has 132K Full-Time Employees, Spent $14.2B on R&D in 2018 Fiscal Year

Following the conclusion of its 2018 fiscal year, which ended September 29, Apple today filed its annual Form 10-K [PDF] with the SEC. We've combed through the exhaustive, legalese-rich 72-page report so you don't have to.


Highlights:
  • 9,000 more employees: Apple has 132,000 full-time employees as of the end of its 2018 fiscal year, up from 123,000 a year prior.
  • R&D expenses rise nearly $3 billion: Apple spent $14.2 billion on research and development in its 2018 fiscal year, a nearly 23 percent increase over the $11.5 billion it spent in its 2017 fiscal year.
  • Apple continues to execute its share repurchase program: Apple had 23,712 shareholders of record as of October 26, 2018, down from 25,333 as of October 20, 2017. There were 4,754,986 outstanding shares of Apple stock as of the end of its 2018 fiscal year.
  • Genius Bar expenses are down: Apple's expenses from warranty claims totaled $4.1 billion in its 2018 fiscal year, down from $4.3 billion in its 2017 fiscal year and $4.6 billion in its 2016 fiscal year.
  • CapEx to drop: Apple anticipates utilizing approximately $14 billion for capital expenditures during its 2019 fiscal year, down from $16.7 billion in its 2018 fiscal year. The capital is used towards Apple's manufacturing equipment, data centers, corporate facilities, and retail stores.
  • Apple snaps up more office space: Apple owned 16.5 million square feet and leased 24.3 million square feet of building space as of September 29, 2018. By comparison, Apple owned 13.4 million square feet and leased 23.0 million square feet of building space as of September 30, 2017.
Apple's annual Form 10-K also acknowledges that "international trade disputes" could adversely affect its business, almost certainly referring to an ongoing trade dispute between the United States and China:
International trade disputes could result in tariffs and other protectionist measures that could adversely affect the Company's business. Tariffs could increase the cost of the Company's products and the components and raw materials that go into making them. These increased costs could adversely impact the gross margin that the Company earns on its products. Tariffs could also make the Company's products more expensive for customers, which could make the Company's products less competitive and reduce consumer demand. Countries may also adopt other protectionist measures that could limit the Company's ability to offer its products and services. Political uncertainty surrounding international trade disputes and protectionist measures could also have a negative effect on consumer confidence and spending, which could adversely affect the Company's business.
Apple's annual Form 10-K can be viewed or downloaded in a variety of formats from the company's Investor Relations website.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Tags: AAPL, SEC

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Apple to Announce Q4 2018 Earnings on November 1

Apple today updated its investor relations page to announce that it will share its earnings results for the fourth fiscal quarter (third calendar quarter) of 2018 on Thursday, November 1.

The earnings release will provide a look at sales of the new iPhone XS and XS Max during their first week of availability, and we may hear some details on how well the Apple Watch Series 4 sold.


Apple has not provided launch weekend sales for the iPhone XS and XS Max, so earnings will mark the first look at how well the updated devices sold compared to the iPhone 8, 8 Plus, and X.

Apple's guidance for the fourth quarter of fiscal 2017 includes expected revenue of $60 to $62 billion and gross margin between 38 and 38.5 percent. In 4Q 2017, Apple posted revenue of $52.6 billion and gross margin of 37.9 percent.

The quarterly earnings statement will be released at 1:30 PM Pacific/4:30 PM Eastern, with a conference call to discuss the report taking place at 2:00 PM Pacific/5:00 PM Eastern. MacRumors will provide coverage of both the earnings release and conference call on November 1.

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Tim Cook Poised to Receive Around $120 Million in Apple Stock as Tenure and Performance Award

Apple CEO Tim Cook is poised to receive 560,000 shares of Apple stock on Friday, worth approximately $120.4 million based on Tuesday's closing price of $215.04. The two-part award is tied to Cook's continued service as CEO, and Apple's relative performance on the stock market under his leadership.


The total includes the vesting of 280,000 restricted stock units for Cook remaining CEO over the past year, and the vesting of another 280,000 restricted stock units for Apple achieving a higher shareholder return than at least two-thirds of other companies in the S&P 500 over the past three years.

Apple's total shareholder return was 119 percent from August 25, 2015 through Tuesday's closing bell, outperforming more than 80 percent of firms in the S&P 500, according to Bloomberg. So, unless Apple suffers a major collapse on the stock market in the next 48 hours, Cook will receive all 560,000 shares.

Cook receives these annual awards as part of a grant he received upon succeeding the late Steve Jobs as CEO of Apple in 2011.

Cook will receive an additional 560,000 shares in each of the next three years if he remains CEO, and Apple's total shareholder return continues to rank among the top-third of companies in the S&P 500. He is also set to receive a lump sum of 700,000 tenure-based shares on August 24, 2021, as part of his grant.

Cook also receives a $3 million salary and earned a $9.33 million cash bonus in 2017, according to Bloomberg.

Cook now has a net worth of around $700 million, according to Bloomberg, but has previously said he plans to give away most of his wealth. Just this week, an SEC filing revealed that Cook recently donated 23,215 shares of Apple stock to charity, worth nearly $5 million based on Tuesday's closing price.

Apple became the world's only trillion dollar publicly traded company, in terms of market capitalization, earlier this month.


Tags: Tim Cook, AAPL

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