This quarter was expected, by Apple’s own estimation, to be its best ever in terms of revenue. The company said it expected to generate between $84 billion to $87 billion for the quarter, far outstripping its previous revenue record of $78.4 billion that it set in the same quarter last year. In the end it pulled in $88.2 billion, a jump of 12.5% over last year. That resulted in profit of more than $20 billion for the quarter, up over 12% from last year.
But it was not all good news for the Cupertino, California, company. Apple did not break its record for the number of iPhones sold in a quarter (it sold 77.3 million this quarter, about 1 million fewer than it sold in the same quarter last year), and its guidance for the current quarter was below what analysts had been expecting, initially sending its stock price down about 1.5% in after-hours trading.
Mike Murphy
Speaking of Apple, they recently announced their first quarter earnings, with record-breaking revenues, but a slight drop in iPhone sales. This year, I didn’t have time to write my usual sales forecast, even though I made some estimations (which were surprisingly accurate in regards to iPhone sales). Despite the good aspects fans like to parade around, I would like to underline two weak spots in Apple’s results:
On an yearly basis, iPhone sales have been stagnating or declining for the past four years, after the launch of the larger screens in the iPhone 6 generation. This first quarter doesn’t appear to signal an improvement for the upcoming year, and the impact of the iPhone X design on sales is negligible compared to the jump to larger screens. This suggests the majority of customers are simply upgrading their old smartphones, and Apple can’t seem to expand its base. Still, the overall market is itself stagnating, so this is more of a general problem of the smartphone segment.
The large ASP for Q1 has also been lauded as validation for Apple’s strategy and proof of the iPhone X’s success. It has indeed increased to almost $800, an all-time high. But the recent evolution of iPhone ASP shows a large ASP in the launch quarters is followed by substantial drops in following quarters, as much as $100 lower. The real measure of success for the iPhone X will be the next months: if the ASP remains fairly high, then we can conclude there is sustained demand for the new, pricier design; if it drops below $700 or more, then the majority of people are probably choosing more affordable models.
I think the iPhone consumer base is starting to show signs of polarization, between a group that rushes to upgrade to the newest model (roughly a third of users), and the rest who are taking their time and opting for older, cheaper models to stay in the ecosystem. It remains to be seen how much Apple can squeeze the first group for profits, as they are most likely the people who regularly buy other Apple products and accessories as they are introduced.
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