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.

Tags: earnings, AAPL

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Strategy Analytics: Apple Shipped an Estimated 65.9 Million iPhones in Holiday Quarter

Apple shipped an estimated 65.9 million iPhones during the first fiscal quarter of 2019 (aka the fourth calendar quarter of 2018) according to new data shared today by Strategy Analytics.

As of this quarter, Apple is no longer providing a breakdown of unit sales of the iPhone, iPad, and Mac, so we will not have concrete data on how well the iPhone is selling going forward.


Apple in Q1 2018 sold 77.3 million iPhones, which would mean Apple sold 11.4 million fewer iPhones in Q1 2019 if Strategy Analytics' estimates are correct, marking a 15 percent decline in sales year-over-year.
Global iPhone shipments fell sharply, due to high retail pricing, unfavorable foreign exchange rates, intense competition from rivals like Huawei, battery replacement programs driving longer ownership cycles, diminished carrier subsidies in some developed markets, and flagging demand in some emerging markets.
Apple's Q1 2019 iPhone revenue was $52 billion, down from $61 billion in the year-ago quarter, also a 15 percent decline. The drop in iPhone revenue led to total revenue of $84.31 billion, down from $88.3 billion in Q1 2018.

Despite the decline in iPhone sales, which Apple CEO Tim Cook has attributed to weakness in China and fewer upgrades, Q1 2019 was Apple's second-best in terms of both revenue and profit, coming in behind only the first fiscal quarter of 2018.


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Apple CEO Tim Cook ‘I Do Think Price is a Factor’ in Declining iPhone Upgrades

During today's earnings call for the first fiscal quarter of 2019, Apple CEO Tim Cook was asked whether he thought that the pricing of the iPhone XR, XS, and iPhone XS Max was too high.

In response, Cook said that while he didn't feel that was as much of a factor in the United States, it was an issue in emerging markets.


The iPhone XS is priced the same as the iPhone X at $999, while the iPhone XS Max, a new device, was $100 more. The XR, at $749, was priced to be right in the middle of the entry level iPhone 8 and iPhone 8 Plus models. Cook said that's a "pretty small difference in the United States compared to last year."

In emerging markets, however, iPhone pricing was an issue due to the strength of the dollar. Foreign exchange rates amplified the pricing increases leading to weaker sales. Cook says that in January, in some locations, the company has absorbed all or part of the currency movements compared to a year ago, getting closer to local price compared to a year ago.

Cook in an interview with Reuters earlier today said that Apple is lowering iPhone prices in some emerging markets.

In developed markets, like Japan, a lack of subsidies has also become a major factor. Even in the U.S., where subsidies have been phased out for several years, Cook said that a person who last purchased an iPhone 6 or 6s for $199 when subsidies were still in place may be reluctant to upgrade to a device that costs upwards of $749 without subsidies.

Apple is working to address the subsidy issue with trade-ins and installment payments.

Cook in a separate statement said all of Apple's devices are designed to last. "We do design our products to last as long as possible," he said. Some customers choose to hold on to those products for as long as possible, while some trade them in. Apple's product cycle has indeed extended and upgrades were less than anticipated last quarter, but Cook says he doesn't know where that will go in the future.

"I'm convinced that making a great product that is high quality is the best thing for the customer. That's the way we look at it."


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Apple CEO Tim Cook: Customers Are Holding on to Older iPhones ‘a Bit Longer’ Than in the Past

Apple saw lower than expected iPhone sales during its first fiscal quarter of 2019 (aka the 2018 holiday quarter) and one explanation provided by Apple was lower quarterly iPhone upgrades. During today's earnings call, Apple CEO Tim Cook delved into the reasons why Apple is seeing fewer upgrades.

First and foremost, he named foreign exchange rates. The strength of the U.S. dollar has made the iPhone much more expensive in many parts of the world, which is why Apple today said that it plans to lower prices in some emerging markets. In Turkey, for example, the iPhone became so expensive due to exchange rates that revenue fell $700 million from the previous year.


Cook also said that iPhone subsidies are becoming increasingly less common, which is impacting upgrade rates. In Japan, for example, it used to be common to have subsidies for smartphones, but local regulations have eliminated many of those. According to Cook, less than half of iPhones sold in Japan were subsidized compared to 3/4ths a year ago. The total value of subsidies has declined as well.

Cook's third reason for fewer iPhone upgrades was the battery replacement program that Apple offered across 2018, allowing customers to swap out the battery in their iPhones for $29. Cook said that this made it inexpensive and efficient to replace iPhone batteries and hold on to older iPhones for a longer period of time.

According to Cook, while analysts suggested Apple shouldn't do it, the company "strongly believes it was the right thing to do for [its] customers."

To combat fewer upgrades, Cook pointed towards Apple's trade-in program, which drives down the price of new devices when trading in older devices, and he highlighted the monthly payment options that Apple recently started promoting on its trade-in page. This page provides details on the monthly price of the iPhone XR and iPhone XS when trading in an older device.


Cook says that while iPhone upgrades were lower than anticipated in China in particular, the company's business grew in the rest of the world, setting new records in the U.S., Canada, Mexico, Germany, Italy, Spain, and Korea.

According to Cook, investors should be aware of three factors long term: a loyal and satisfied customer base, a large and growing active installed base, and Apple's deeply ingrained culture of innovation.


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Apple’s Services Revenue Up 19% Year-Over-Year in Q1 2019, Hits New All-Time High

Apple's services category, which includes iTunes, the App Store, the Mac App Store, Apple Music, Apple Pay, and AppleCare is an increasingly important revenue driver for Apple amid stagnating iPhone sales, and services growth is once again hitting an all time high.

During the first fiscal quarter of 2019, Apple's services segment brought in $10.9 billion in revenue, up from the $9.1 billion services earned in the first quarter of 2018.


In all five of its geographic regions, including China, Apple saw new December quarter revenues record for the services category.

Apple hit a December quarter record for AppleCare, and nearly 16 years after launching iTunes Store, it saw its highest quarterly revenue ever thanks to Apple Music. The App Store also saw record results propelled by record sales on Christmas and New Years.

Over 1.8 billion Apple Pay transactions were made during the quarter, 2x more than the previous quarter, and Apple News set a new record with more than 85M monthly active users.

Apple has more than 360 million paid subscribers across its services, an increase of 120 million compared to the year-ago quarter. Apple CFO Luca Maestri said that the company expects the total number of paid subscribers to surpass half a billion in 2020.

Apple is aiming to reach $14 billion in services revenue per quarter by 2020, and it is well on its way towards reaching that goal.

Apple is working on bolstering its services category in 2019, breaking into the television industry. Apple is has more than two dozen original television shows in the works right now, which will be distributed through a TV streaming service set to debut early in 2019.

An Apple News subscription service is also in the works and could come out around the same time, with Apple planning to offer access to magazines for a monthly fee, and there have been rumors Apple is considering a gaming subscription service as well.


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Apple Now Has 1.4 Billion Active Devices Worldwide

Apple CEO Tim Cook today announced that its active installed base of devices has hit 1.4 billion, a milestone the company hit at the end of December.

Apple's active installed base includes the iPhone, iPod touch, iPad, Mac, Apple TV, and Apple Watch models in use around the world. Of the 1.4 billion active devices, 900 million of those are iPhones.


The new 1.4 billion milestone comes nearly a year after Apple announced that it had 1.3 billion active devices back in December 2018, and the growth comes despite a Q1 2019 decline in iPhone sales.

On the strength of that active installed base, Apple's services category set new all-time records, seeing a 19 percent growth in revenue year-over-year.


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Apple’s ‘Wearables, Home and Accessories’ Category Now Bringing in More Revenue Than iPad, and Soon Mac

Apple's "Wearables, Home, and Accessories" category, which used to be called the "Other" category, has surpassed the iPad in revenue and is closing in on the Mac lineup as well.

The Wearables, Home, and Accessories category brought in $7.3 billion during the quarter, compared to $6.7 billion for iPad and $7.4 billion for Mac. Overall, Wearables, Home and Accessories category growth was up 33 percent compared to the $5.5 billion it earned in the year-ago quarter.


Apple Watch, HomePod, Apple TV, AirPods, Beats products, iPod touch, and Apple-branded and third-party accessories are included in the category, but it's Apple's wearables that have been driving growth.

The wearables category has been setting regular quarterly revenue records thanks to the strength of Apple Watch sales. In Q4 2018, for example, Apple saw wearables growth over 50 percent, and we're likely to hear more about wearables during today's earnings call.

As Asymco's Horace Dediu pointed out at the beginning of January, the Apple Watch is also now a "decidedly bigger business" than Apple's iPod ever was, based on historical revenue records and estimated Apple Watch sales.


Apple does not break down Apple Watch sales individually, lumping the data in with sales of other products in the Wearables, Home, and Accessories category, but the company does often give hints on how well the Apple Watch is selling.

With iPhone sales stagnating somewhat, Apple will be increasingly relying on revenue from its wearables category to drive growth. The company will also be looking to its services category, which has been bringing in more revenue than the iPad and the Mac categories for quite some time now.


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Apple Reports 1Q 2019 Results: Nearly $20B Profit on $84.3B Revenue, Second-Best Quarter Ever Despite Earnings Warning

Apple today announced financial results for its first fiscal quarter of 2019, which corresponds to the fourth calendar quarter of 2018.

For the quarter, Apple posted revenue of $84.31 billion and net quarterly profit of $19.965 billion, or $4.18 per diluted share, compared to revenue of $88.3 billion and net quarterly profit of $20.1 billion, or $3.89 per diluted share, in the year-ago quarter.

The earnings report comes after Apple issued a rare warning on January 2 that revenue for the quarter would come in at least $5 billion below the company's original guidance, with Apple pointing to a number of factors including the later launch of the iPhone XR, general weakness in China, and fewer upgrades as customers took advantage of Apple's reduced pricing on battery replacements in 2018 to extend the lives of their current phones.

Even with the earnings warning, the quarter was the second-best in Apple's history in terms of revenue and profit, trailing only the first fiscal quarter of 2018.

Gross margin for the quarter was 38.0 percent, compared to 38.4 percent in the year-ago quarter, with international sales accounting for 62 percent of revenue. Apple also declared an upcoming dividend payment of $0.73 per share, payable February 14 to shareholders of record as of February 11.


This quarter also marks a change in the way Apple reports its results, as the company is no longer providing unit sales data for iPhone, iPad, and Mac. Apple argues that quarterly unit sales are not an accurate indicator of the underlying strength of Apple's business, but critics have suggested the move is an attempt to make it less obvious that Apple is making up for sagging unit sales by selling more expensive devices.
“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” said Tim Cook, Apple’s CEO. “Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”
Apple's guidance for the second quarter of fiscal 2019 includes expected revenue of $55-59 billion and gross margin between 37 and 38 percent. That revenue figure is near or slightly below analysts' expectation of around $59 billion. Apple's stock is currently up about 2.5 percent in after-hours trading following the release.


Apple will provide live streaming of its fiscal Q1 2019 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.


Loose transcript of conference call ahead… Continue reading "Apple Reports 1Q 2019 Results: Nearly $20B Profit on $84.3B Revenue, Second-Best Quarter Ever Despite Earnings Warning"

Apple to Announce Q1 2019 Earnings on January 29

Apple today updated its investor relations page to announce that it will share its earnings for the first fiscal quarter (fourth calendar quarter) of 2019 on Tuesday, January 29.

Along with the notice on when to expect earnings results, Apple today also announced revised guidance for the first fiscal quarter, which will make the January earnings call an interesting one.


Apple now expects revenue of $84 billion and gross margin of 38 percent, down from a guidance of $89 to $93 billion provided in November during the fourth quarter earnings call.

Apple CEO Tim Cook provided several reasons for the drop in an open letter to investors:

  • iPhone XS, XS Max, and XR launch timing compared to iPhone X timing in 2017

  • A strong U.S. dollar

  • Supply constraints on Apple Watch Series 4, iPad Pro, AirPods, and MacBook Air

  • Economic weakness in emerging markets, specifically China

  • Trade tensions with China

  • Lower than anticipated iPhone revenue, primarily in China

  • Weak iPhone upgrade numbers in some developed markets due to fewer carrier subsidies and low-priced battery replacements in 2018


The earnings call will provide more detailed information on Apple's revised guidance, though the January 29 earnings report will be the first without specific unite sales data for iPhone, iPad, and Mac, which Apple said it would stop providing back in November.

It marks a major change in the way that Apple's sales data is reported, making estimating iPhone, Mac, and iPad product sales more difficult. At the time the change was announced, Apple CFO Luca Maestri said that the company does not believe unit sales over the course of a 90-day period are an indicator of the underlying strength of its business.

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 January 29.


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Apple Blames Currency Fluctuations and Uncertainty in Emerging Countries for Weak Holiday Sales Estimates

Though iPhone revenue was up in 4Q 2018, fourth quarter iPhone XS and XS Max sales were not as strong as expected, and iPhone sales growth was essentially flat. Apple sold 46.9 million iPhones during the quarter, compared to 46.7 million in the year-ago quarter, missing analyst estimates.

Apple's $89 to $93 billion revenue forecast for the first fiscal quarter of 2019 is rather also cautious, which Apple blamed on foreign exchange costs, issues with supply/demand balance, and weakness in emerging markets.


"Virtually every foreign currency has depreciated against the dollar over the last 12 months," said Apple CFO Luca Maestri. "That adds 200 basis points of headwinds to the tune of $2 billion to our revenue."

Uncertainty in emerging markets is also a factor. "There's some level of uncertainty at the macroeconomic model in some emerging countries where consumer confidence is not as high," said Maestri.

Maestri also said that Apple has launched an "unprecedented number" of new products over the course of the last six weeks, and Apple has "some uncertainty" around supply/demand balance for some of these products. The launch timing of the new iPhones is also a factor, with the iPhone XR coming later than the XS and the XS Max. This had an effect on Apple's Q4 revenue and will also impact Q1.

Despite the cautious guidance for the first fiscal quarter of 2018, Apple is "very excited" about its lineup of products and services entering the holiday shopping season, and Maestri said that Apple has the "strongest lineup" it's ever had.

Going forward, Apple does not plan to break down unit sales of the iPhone, iPad, and Mac, a major change to the way that earnings data is presented. Apple will, however, continue to provide details on overall iPhone, iPad, and Mac revenue.

Apple CEO Tim Cook and Apple CFO Luca Maestri explained during today's earnings call that Apple does not believe that providing unit sales is relevant for the company at this point.


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