Apple Earnings Soar, While iPhone Declines Continue

Apple Services Step Up As The iPhone Steps Back

With a top and bottom line beat, a stock buyback and stronger than expected guidance for Q3, there was a lot for investors to like about Apple’s March quarter earnings report – and it seems they were more than satisfied with the overall results, as Apple shares spiked 4 percent in after-hours trading and got within touching distance of that trillion-dollar valuation.

By the numbers, earnings clocked in at $2.46 per share, comfortably ahead of the $2.36 forecast by analysts pre-release. Revenue hit $58.02 billion, ahead of the $57.37 billion predicted by analysts. For the next quarter, Apple is looking for  $52.5 to $54.5 billion, ahead of $51.94 billion predicted.

The major point of concern among analysts, investors and Apple watchers was the continued decline in iPhone sales revenue. The iPhone is still Apple’s cash engine – responsible for 53.3 percent of the company’s total revenue – and its sales continue to decrease. iPhone revenue came in at $31.05 billion – more or less in line with analysts’ predictions, but still a 17 percent year-on-year decline.

CEO Tim Cook didn’t have much to say about the iPhone decline during his remarks to analysts post release, only mentioning Apple’s flagship device six times. The Apple Watch got the same number of mentions, Apple Pay got seven and iPad got 10, as did Apple Services.

In fact, services were in many ways the start of the earnings show, with its revenue growing almost as much as iPhone’s fell – up 16 percent to $11.45 billion. Services is home to such offerings as Apple Music, iCloud storage, AppleCare warranties and Apple Pay. The year has seen increasing focus on Apple’s up-and-coming revenue engine. In March, the company announced the new parcel of services it’s rolling out to bulk up that offering, including a subscription streaming service, a subscription news service, a video game service and a new credit card. When asked by analysts if more services were in the works, Cook demurred on announcing anything new, though he certainly left the door open:

“We’re always working on new things.”

Among services, Apple Pay got a lot of focus during the call. Cook noted that transactions had grown 50 percent year on year, and that their expectation is to hit 10 billion transactions by the end of 2019. The service is available in 30 global markets currently, according to Cook, and will begin going online with New York's MTA system in July of this year.

“As we've seen in places like London, Tokyo and Shanghai, contactless entry into transit systems helps to spur broader Apple Pay adoption, and we believe this will get even more people using Apple Pay in the United States,” he noted.

Subscription services also got a lot of floor time. As of today, Apple claims 390 million paid subscriptions, a sum that increased by 30 million in the last quarter alone.

Apple did not update its installed base figures from 1.4 billion last quarter, though Cook did note that the company “hit an all-time record last quarter.”

As for its other hardware offerings, Apple noted sales in its wearables business were up 50 percent year on year. The iPad had a surprisingly good quarter, reportedly largely buttressed by iPad Pro sales, with revenue up 22 percent year on year.

With earnings for the quarter now in the history books, Apple started building excitement for its next big event for watchers: its annual Worldwide Developers Conference in June.



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