Apple Watch and Airpods saved Apple's Q4

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Apple’s Q4 earnings were higher than expected, with the company’s revenue returning to growth after two straight down quarters.

Their share price more than 4% in after-hours trading.  Apple also declared a cash dividend of $0.77 per share.

Here’s how the company did versus what analysts expected:

  • EPS: $2.18 vs. $2.10 estimated by Refinitiv consensus estimates.
  • Revenue: $53.8 billion vs. $53.39B estimated by Refinitiv consensus estimates.
  • Q4 Revenue guidance: $61 billion to $64 billion versus $60.98 billion estimate by Refinitiv consensus estimates.
  • iPhone revenue: $25.99 billion vs. $26.31 billion estimated by FactSet.
  • Services revenue: $11.46 billion vs. $11.61 billion estimated by FactSet.

Apple’s revenue was up 1% from the quarter last year but earnings per share were down 7%.

Apple CEO Tim Cook said:

We’re very excited to report a return to growth for the quarter, and it’s a record revenue for Q3 as well, best we’ve ever had.

Great services quarter, unbelievable wearables quarter, significant progress on iPhone, and off-the-charts significant progress on China, compared to where we were the previous quarter.

Apple spent over $17 billion on share buybacks of almost 88 million Apple shares and paid out $3.6 billion in dividends and equivalents during the quarter.

Wedbush analyst Dan Ives said in a note:

The highlight of this release and focus of investors in our opinion will be the robust September guidance for total revenue of between $61 billion and $64 billion vs. the Street’s $60.9 billion estimate

Fall in iPhone Revenue

Apple’s iPhone revenue was actually lower than what analysts expected- falling 12% from the same quarter last year.  The iPhone contributed to less than half of Apple’s sales for the first time since 2012- 48.3%,

Strong Wearables and Services Growth

The growth of Apple’s wearables business is “accelerating”, said Apple CFO Luca Maestri.  The Apple Watch, AirPods and Beats Headphones showed growth over 50%.

Services revenue growth was slightly under analyst expectations.  Subscriptions, App Store fees and other online services grew by 13%.  CEO Tim Cook mentioned that if it wasn’t for the recent lawsuit, as well as foreign exchange rates, its services product category would have grown by 18%.

Apple’s services margins were over 64%, at an all-time record.  Cook commented:

Our strong services performance was broad-based.

We set new all-time records for AppleCare, music, cloud services, and our App Store business, and we achieved a new third quarter revenue record for the App Store.

Cook noted that if you add the wearables and services product categories together, they are approaching the size of a Fortune 50 company.

Apple also commented that the installed base of iPhones has hit an all-time high.

“Our strong services performance was broad-based,” Cook said in a call with analysts. “We set new all-time records for AppleCare, music, cloud services, and our App Store business, and we achieved a new third quarter revenue record for the App Store.”

Outperforming Expectations in China

Apple performed well in the Chinese market this year, which was one of the main contributing factors to previous disappointing quarters.

Cook commented that a Chinese VAT tax cut had most likely been responsible:

The VAT reduced from 16% to 13%, that’s clearly a big help. We took some price action, that’s a big help. We introduced trade-in and financing, that’s a big help. The more subjective thing is, when the countries are meeting and talking, that’s better than not

Cooke also reported that Apple returned to growth in Mainland China; Apple had $9.61 billion in sales in its Greater China category, which includes Taiwan and Hong Kong.  The previous quarter displayed a decline in Apple’s Greater China sales of 22%, with China’s sales down 4%.

Apple’s acquisition of Intel

Apple bought Intel’s modem division for $1 billion, earlier this month.  Cooke explained the decision as strategic, and that Apple has a long-term strategy of “owning and controlling the primary technologies behind the products that we make.”

This is our second largest acquisition by dollars and our largest ever in terms of staff

It remains to be seen if Apple’s naturally limited accessory business will be able to continue to sustain the company in the face of continuing falls in iPhone sales.

Source: CNBC ; Image: AppleInsider

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