Crunching Apple: What you need to know about iPhone giant’s Q1

2 Feb 2018

An iPhone X billboard in London. Image: photobyphm/Shutterstock

Apple pips Samsung in crucial holiday quarter, but did iPhone X deliver?

California tech giant Apple has reported first-quarter revenues of $88.3bn, up 13pc on last year, yielding it a tidy $20bn profit.

During the quarter, Apple sold 77.3m iPhone smartphone devices, down from 78.2m last year, but still accounting for a bigger share of revenue of $61.5bn, compared with iPhone sales of $54.3bn during Q1 last year.

‘Our growth was broad-based, and a key driver was iPhone, which generated its highest revenue ever’

Sales of iPads were up slightly to 13.1m devices from 13.0m last year, accounting for $5.8bn in revenue.

Apple sold 5.1m Mac computers during the first quarter, down from 5.3m units in the first quarter of 2017, accounting for $6.8bn in revenue.

“We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone line-up,” CEO Tim Cook said.

“[The] iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November.

“We’ve also achieved a significant milestone with our active installed base of devices reaching 1.3bn in January. That’s an increase of 30pc in just two years, which is a testament to the popularity of our products and the loyalty and satisfaction of our customers.”

Looking ahead to Q2, Apple predicts revenues of between $60bn and $62bn.

So, what did we learn from these latest results?

iPhones are still selling like hotcakes

There was some expectation from the boffins in Wall Street that Apple would sell 80m iPhone devices rather than the 77.3m that emerged in the results.

However, Apple is doing quite nicely as average selling prices are ahead of Wall Street’s expectations, with $796 per device compared to estimates of $756. When you consider that each iPhone is estimated to cost around $219 to make, that’s a tidy profit for Apple, don’t you think? Each iPhone X starts at €1,179, so it’s no wonder Apple is celebrating.

“What makes this even more remarkable is that the quarter we’re reporting today was 13 weeks long, while the year-ago quarter was 14 weeks,” said Cook in an earnings call last night (1 February).

“When we look at the average revenue per week in the December quarter this year compared to last year, our growth was a stunning 21pc. Our growth was broad-based, and a key driver was iPhone, which generated its highest revenue ever.”

X marks the spot for Apple

The traditionally strong holiday sales season for smartphones in 2017 wasn’t as stellar as previous years, as smartphone sales are generally plateauing. Either way, Apple managed to surge past Samsung, capturing the number-one position worldwide. Apple sold more than 77m devices during the pivotal quarter compared with Samsung, which shipped more than 74m devices in the same period, according to IDC.

Apple experienced a slight downturn from the previous holiday quarter as iPhone volumes reached 77.3m units, a year-over-year decline of 1.3pc. Volumes were still enough to push Apple past Samsung and back into first place in the smartphone market, largely because of the iPhone 8, 8 Plus and iPhone X.

Apple continues to prove that having numerous models at various price points bodes well for bringing smartphone owners to iOS. IDC surmised that although demand for the new higher-priced iPhone X may not have been as strong as many expected, the overall iPhone line-up appealed to a wider range of consumers in both emerging and developed markets. Apple finished second for the full year in 2017, shipping 215.8m units, up 0.2pc from the 215m units shipped in 2016.

“iPhone X was the best-selling smartphone in the world in the December quarter, according to Canalys, and it has been our top-selling phone every week since it launched,” Cook said in the earnings call.

“iPhone 8 and iPhone 8 Plus rounded out the top three iPhones in the quarter. In fact, revenue for our newly launched iPhones was the highest that any line-up in our history [has had], driving total Apple revenue above our guidance range. I want to take a moment to recognise the tremendous amount of work that went into creating iPhone X.

“Our teams carried out an extremely complex launch, from both an engineering and operations perspective, executing an outstanding product ramp that required years of research and development. One that introduced innovative features, like an edge-to-edge Super Retina display and the TrueDepth camera, which enables Face ID. Our customers love these new features and the new gestures, like simply swiping up from the bottom, which make using iPhone even more intuitive and enjoyable.”

Services division is the ones to watch

As Ireland still awaits a final outcome from Apple itself as to whether it will build its proposed data centre complex in Athenry, Co Galway, following a frustrating amount of legal wrangling, the dark horse in Apple’s armoury is its Services division.

Services – comprising revenues from iCloud and Apple Music – is the fastest-growing cash cow to graze in Apple’s pastures, and represents the second-biggest revenue source for the company.

During the first quarter, Services accounted for $8.4bn in sales, up from $7.1bn last year.

‘Other Products’ – including devices such as the Apple Watch and Apple TV – brought in $5.4bn in revenue during Q1.

So, even though the iPhone is Apple’s biggest earner, keep an eye on Services and Other Products, which are catching up fast on segments such as Mac and iPad.

An iPhone X billboard in London. Image: photobyphm/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years