Apple Announces Q4 FY 2018 Earnings: Revenue Up, Sales Not

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This afternoon Apple announced their earnings for the fourth quarter of their 2018 fiscal year, and in what can only be described as a very Apple-esque quarter, revenue was up 20% year-over-year to $62.9 billion. Gross margin came in at 38.2%, up 0.3% from a year ago. Operating income was up 22.9% to $16.1 billion, and partially due to the new tax cuts, net income was up 31.8% to $14.1 billion. Earnings per share were up 40.6% to $2.91.

Apple Q4 2018 Financial Results (GAAP)
  Q4’2018 Q3’2018 Q4’2017
Revenue (in Billions USD) $62.900 $53.265 $52.579
Gross Margin (in Billions USD) $24.084 $20.421 $19.931
Operating Income (in Billions USD) $16.118 $12.612 $13.917
Net Income (in Billions USD) $14.125 $11.519 $10.714
Margins 38.5% 38.3% 37.9%
Earnings per Share (in USD) $2.91 $2.34 $2.07

As usual, iPhone leads the way at Apple, but as has become the norm the Q4 results will only have a glimpse at the new launch sales, since this quarter ended on September 29. iPhone revenue was up a staggering 29% year-over-year to $46.9 billion, but overall unit sales were up only 0.4% from Q4 2017, with 46.9 million devices sold this quarter. But with iPhone pricing moving in an upward trajectory, Apple now has an amazing $793.04 average selling price on iPhone.

The other half of iPhone is Apple’s services, which are up 17% year-over-year to just under $10 billion for the quarter. Services include digital content, Apple Pay, and of course iTunes sales.

We just saw a Mac event this week, showing off the new MacBook Air and Mac Mini, but with this quarter ending in September we won’t be able to see that impact Mac sales until Q1 2019. For this quarter, Mac sales fell 2% to 5.3 million units, with revenue up 3% reflecting the higher price of the new models.

iPad sales also fell. Apple sold 9.7 million iPads this quarter, which was down 6% from last year. Revenue fell even further though, coming in at $4.1 billion for the quarter, which is a 15% drop from Q4 2017. Apple’s price-reduced iPad has likely eaten into sales of the more profitable Pro models, but like the Mac updates, the latest iPad Pros were just announced and won’t be reflected in this quarter’s earnings.

Apple Q4 2018 Device Sales (thousands)
  Q4’2018 Q3’2018 Q4’2017 Seq Change Year/Year Change
iPhone 46,889 41,300 46,677 +14% +0.4%
iPad 9,699 11,553 10,326 -16% -6%
Mac 5,299 3,720 5,386 +42% -2%

Finally, Apple’s “Other” category, which has become their catch-all, had $4.2 billion in revenue, which was up 31% from a year ago. Other now includes HomePod, in addition to Apple TV, Apple Watch, Beats, and accessories.

Apple is expecting revenues for Q1 2019 to be between $89 and $93 billion, with margins between 38% and 38.5%.

Moving forward, Apple has also decided to stop reporting unit sales. This is unfortunate, because Apple has been more open on their earnings than several of their competitors, even though they’ve never broken-down sales per-model in a category. There’s likely a good reason for this of course. With device sales declining, they will be taking heat, despite the company continuing to increase revenue.

Source: Apple Investor Relations

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