Apple delivers record sales and profit and the stock is spiking

Apple CEO Tim Cook. Photo: Scott Olson/ Getty Images.

  • Apple beat Wall Street expectations for both revenue and earnings per share when it announced December quarter earnings on Thursday.
  • However, Apple’s iPhone sales were down from the same period last year.
  • Investors are happy. The stock rose over 3% in after-hours trading.

  • Apple delivered record revenue and profit in its first quarter earnings on Thursday, but sales of the iPhone, the company’s most important product, declined year-over-year.

    The company also provided a forecast for next quarter that was significantly lower than Wall Street was expecting.

    Apple shares were up over 3% in after-hours trading after briefly dropping.

    This time last year Apple, Apple sold 78 million iPhones, but this year, it only sold 77.3 million units, although the quarter was one week shorter than last year.

    The shortfall in iPhone sales were made up by a significantly higher average iPhone price — $796, over $100 more than the average iPhone price last holiday season. That sharp increase in average iPhone prices is likely due to the iPhone X, Apple’s highest-end phone, with a starting price of $999.

    Apple also said it planned to reduce its net cash balance to “approximately zero” after December’s major tax reform and the company paying $38 billion in taxes to the US government, CFO Luca Maestri told the Financial Times.

    That means that Apple could spend as much as $163 billion in the short-term on acquisitions, dividends, and buybacks. Apple declared a dividend of $.63 per share on Thursday.

    Still, the iPhone maker delivered a big quarter. Here are the key numbers:

      Revenue: $88.3 billion, up 12.6% year-over-year, versus expectations of $87.1 billion

      Earnings per share (GAAP): $3.89, up 15.7% year over year, versus expectations of $3.83

      Gross margin:
      38.4%, flat year-over-year, verus expectations of 38.4%

      iPhone sales:
      77.3 million units, down 0.9% year-over-year, versus expectations of 80.2 million

      iPhone average selling price: $796,

      iPad sales:
      13.1 million

      Mac sales:
      5.1 million

    Here are the key charts:

    Notes from the call:

    6:01: Thanks for tuning in, we’re done here!

    6:00: Capital repatriation timeframe will be answered in the March quarter, Maestri says. Tim Cook adds: Apple’s not going into debt.

    5:59: Everywhere I look I feel really good about how we’re doing in China, Tim Cook said.

    5:55: HomePod question. Tim Cook goes ahead and basically reads the product page and lists its features. “Use case, much like our phones, broad-based.”

    5:53: Switchers question for Tim Cook. “It’s so early on this product cycle. iPhone X started in November, we do not have data that would be meaningful to share. “

    5:50: Tim Cook admits that “the replacement cycle is likely longer” in certain markets for iPhones.

    5:47: “We did not consider in any way shape or form what it would do to upgrade rates” when Apple introduced the $29 battery replacement, says Tim Cook.

    5:42: Question about longer replacement cycles for the iPhone. “Generally what we see with the iPhone is that the reliability is fantastic,” Tim Cook said. “iPhone reliability” seems to be a new Tim Cook talking point, especially in the wake of the CPU throttling controversy.

    5:40: Tim Cook won’t talk about future products, but says the iPhone X sets Apple up for the “next decade.”

    5:36: iPhone sell-through growth will accelerate in this upcoming quarter, with double-digit year-over-year growth, Maestri said, trying to soft-pedal the low guidance.

    5:31: Tim Cook says iPhone X satisfaction is “off the charts.” One of his favorite phrases. In “urban China,” all of the five top smartphones were iPhones, he says.

    5:30: Now it’s onto the questions. First is about bringing money home. “We’ll do it over time, because the amount is very large,” Maestri said.

    5:27: Targeting “net cash neutral” over time, and will provide an update to its plans to buy dividends and buybacks next quarter, Maestri says.

    5:22: New program called “Apple at Work” to encourage companies to support iPhones and help them buy Apple stuff for their employees, Maestri says.

    5:21: Weekly iPhone sales were up 6% year-over-year, Maestri says.

    5:20: Wearables were the 2nd largest contributor to revenue growth after iPhone, Maestri says, and were up 70% year-over-year.

    5:14: Now onto CFO Luca Maestri. “All time quarterly records in nearly all markets we track,” he said.

    5:10: Sales of Apple Watch Series 3, the new model, were “more than twice the volume” of Series 2 last year.

    5:08: Apple Pay is now accepted in over half of retail locations in the United States, says Tim Cook. Volume tripled year-over-year.

    5:07: 240 million paid subscribers for services, up 30 million in the last three months, according to Tim Cook.

    5:05: iPhone X is Apple’s “top-selling iPhone” every week since it’s launched. Apple is showing “how business can be a force for good in the world,” Apple CEO Tim Cook said.

    5:04: “Apple’s all-time biggest quarter ever,” says Cook. Points out that Apple had one fewer week in the December quarter this year than last year.

    Apple has 1.3 billion active devices and “at an all-time high” for all products, says Tim Cook. Speaks to the reliablity of the product, he said.

    5:00: We’re get started. First is CEO Tim Cook and next is CFO Luca Maestri.

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