Apple Inc. (NASDAQ:AAPL) needed a strong showing in its recently completed quarter, in the shadow of three straight quarters of waning revenue and waning earnings. It got it, sending AAPL stock up 2.6% in Tuesday’s after-hours trading.
For the company’s first fiscal quarter ending in December, Apple reported income of $3.36 per share on revenue of $78.4 billion. Both were better than analyst expectations for a profit of $3.22 per share on revenue of $77.42 billion. AAPL posted income of $3.28 per share in the same quarter a year earlier, when it generated $75.87 billion in sales.
CEO Tim Cook commented on the results:
“We’re thrilled to report that our holiday quarter results generated Apple’s highest quarterly revenue ever, and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch.”
CFO Luca Maestri added:
“Our outstanding business performance resulted in a new all-time record for earnings per share, and over $27 billion in operating cash flow. We returned nearly $15 billion to investors through share repurchases and dividends during the quarter, bringing cumulative payments through our capital return program to over $200 billion.”
Apple Earnings
While AAPL stock has been a strong growth machine since unveiling the first iPhone a little over a decade ago, per-share profits have been lower on a year-over-year basis in each of the prior three quarters. The same goes for revenue. Q1’s numbers largely rekindle confidence in the company’s prospects.
Almost as important as Apple’s top and bottom lines for the first fiscal quarter of the year was the number of iPhones it sold during the accounting period in question.
Broadly speaking, the pace of sales growth of the iPhone has been slowing as saturation and better competition chip away at Apple’s prowess in the market. The iPhone 7 and iPhone 7 Plus were released in September, before the end of the previous quarter.
The bulk of the device’s sales, though, came in the subsequent quarter beginning in October. During that three-month span, the company sold 78.2 million of the smartphone ($58.4 billion worth of the device), versus expectations of 77.3 million. The company didn’t indicate how many of those were iPhone 7 phones, but Cowen & Co. had forecast 58.5 million iPhone 7’s were sold during fiscal Q1.
The company’s fast-growing digital product arm — music, video and apps — drove respectable revenue during the quarter as well.
Digital content as a revenue source had not been a priority for AAPL until sales of Macs, iPhones and iPads began to slow down last year. The company turned up the heat on this line last year, however, and has turned the unit into Apple’s second-biggest piece of revenue pie. Last quarter it contributed $7.17 billion worth of sales, up 18% from year-ago levels, and accounting for 9% of total sales. Analysts had only expected $7.07 billion worth of services revenue.
Apple is even mulling the creation of its own original television shows and movies, following in the footsteps of on-demand video rivals Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN).
Geographically, the Americas continue to provide the bulk of Apple’s revenue, though China and its neighbors provided the majority of revenue growth last quarter.
The Americas accounted for $31.9 billion in Apple’s sales last quarter, up 58%. China put $16.2 billion worth of revenue on the table, up 85% year-over-year. Japan and the rest of the Asia-Pacific area only contributed $5.9 billion in sales, but that tally was up 119% versus the tally from the same quarter a year earlier.
The future of Apple’s business in China hangs in the balance. President Donald Trump’s policy plans are said by some to be the beginning of a trade war. Not only would that make iPhones more difficult to sell in China, but would strain Apple’s relationships with key manufacturers of iPhone, iPad and Mac components.
Bottom Line for AAPL Stock
Looking ahead, Apple anticipates revenue of between $51.5 billion and $53.5 billion for the quarter currently underway. The company doesn’t provide earnings guidance, but as of the latest look, the pros collectively believe Apple will earn $2.09 per share of Apple stock on revenue of $53.94 billion.
Both figures are higher than year-ago comparisons, and those estimates may well be adjusted higher before the second quarter numbers are posted.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
