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Apple reports record Q4 2019 revenue of $64 billion, aided by service


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While Apple’s fiscal 2019 will be remembered as a year of ups and downs, growth of the company’s subscription services last quarter helped reverse serious holiday season and second quarter shortfalls. Today, Apple announced its fourth quarter 2019 results, top-lined by revenues of $64 billion, slightly higher than the year-ago quarter: Services revenue grew sharply, while earnings from both iPhones and Macs fell somewhat below last year’s levels.




In July, Apple told analysts to expect fourth quarter revenues in the $61 to $64 billion range, with a gross margin between 37.5% and 38.5%. Ahead of the announcement, analysts expected sales of $63 billion, up only slightly from actual sales of $62.9 billion in Q4 2018, and $2.83 in estimated earnings per share, down from $2.91 one year ago. Actual earnings per share were $3.03, up 4%, though net income was down to $13.686 billion from $14.125 billion.


“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables, and iPad,” said Apple CEO Tim Cook. “We’re very optimistic about what the holiday quarter has in store.”


For the quarter, Apple says it sold $33.362 billion in iPhones, $6.991 billion in Macs, and $4.656 billion in iPads. Its combined “wearables, home and accessories” sales were $6.52 billion, while services hit $12.511 billion, another record. The numbers represent year-over-year drops for both iPhones and Macs: One year ago, iPhones were at $37,185 billion, Macs were at $7.411 billion. But the numbers are up for iPads, wearables, and services, which during last year’s quarter were at $4.089 billion, $4.234 billion, and $9.981 billion, respectively.


Geographically, net sales eased down from $15.382 billion to $14.946 billion in Europe, and similarly slid year-over-year from $11.411 billion to $11.134 billion in Greater China, as well as Japan, which fell down to $4.982 billion from $5.161 billion. However, Apple saw some improvement in the Americas, which grew to $29.322 billion from last year’s $27.517 billion of total revenues, and the Asia Pacific region, which went up to $3.656 billion from $3.429 billion in the year-ago quarter. Apple notes that international revenues accounted for 60% of its quarterly revenues.


For the first fiscal quarter of 2020, Apple is predicting revenue between $85.5 and $89.5 billion, in any case higher than its disappointing Q1 2019 holiday numbers, and possibly above its $88.3 billion 2018 holiday quarter. It also expects a gross margin between 37.5% and 38.5%, operating expenses between $9.6 and $9.8 billion, $200 million of other income, and a tax rate of 16.5%. Once again, the company is issuing a $0.77 per share cash dividend, payable on November 14 to shareholders on record as of November 11, 2019.


Today’s results come one year after Apple decided to stop reporting unit sales for key products such as iPhones, iPads, and Macs, in favor of merely reporting revenues across those categories. In prior years, the company had sold well over 200 million iPhones annually, but the numbers were expected to flatten or dip for a variety of reasons after impressive 2018 quarters. Meanwhile, the “other products” or “wearables, home and accessories” category’s sales of wireless AirPods headphones and Apple Watches grew in dollar value without any breakdown of units sold, leaving their individual sales figures to be estimated by analysts.


The Q4 2019 numbers include early contributions from the iPhone 11 and iPhone 11 Pro, released in September, as well as the Apple Watch Series 5 and substantially discounted Series 3. Apple has also launched multiple subscription services in recent months, including Apple News+Apple Card, and Apple Arcade, with Apple TV+ arriving two days from now, though early reviews have been decidedly mixed, leaving the upside for Apple somewhat unclear after significant investments in the offerings.





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Apple earnings Q4 2019: Tim Cook says health will be what Apple is remembered for

Huge wearables growth and strong figures for services and iPad set new records.

The new Apple Watch Series 5.
Enlarge / The Apple Watch Series 5 has an always-on display thanks to new and improved display internals.

Apple's quarterly earnings calls have fallen into a predictable pattern for the past year or two: iPhone revenues are declining year-over-year, and the Mac mostly remains stagnant, but every other one of Apple's businesses—wearables and services most notably—are ballooning.


That was the case again with Apple's Q4 2019 earnings report today; iPhones were down, but the company posted its highest revenue ever in a September quarter thanks to good performance from services like the App Store, AppleCare+, and Apple Pay, as well as strong iPad and Apple Watch sales. Total revenue was $64 billion.


Apple revealed during the proceedings that the iPhone 11 (sans Pro) is now its best-selling phone, and that iPhone revenue was $33 billion—a 9% decline over the same quarter the previous fiscal year, albeit an improvement over the 15% decline the company saw in the previous three quarters this year. (That improvement is very likely accounted for by the launch of the iPhone 11 and its ilk mid-September, just before the quarter ended.)


Mac sales were down 5%, but Apple CEO Tim Cook was quick to point out on the earnings call with investors that the company released a major update to the MacBook Air, one of its most popular computers, around this time last year but has not done so yet this year, ostensibly explaining some of the drop.


Apple is expected to refresh some of its laptops in the coming months and plans to imminently launch the pricy Mac Pro. Aimed at creative professionals, the Mac Pro's price point makes it less of a mass-market device than the MacBook Air.


Apple boasted 18% growth in services revenue, an improvement over the previous quarter that brings the 2019 fiscal year total to $46 billion. It was $12.5 billion for this quarter on its own. Among other things, this was credited to "all-time record revenues from payment services" like Apple Pay. The company alluded to the recent launches of Apple Card, Apple News+, and Apple Arcade, but it did not provide individual numbers for them during the call. Apple also said today that this was the best quarter ever for AppleCare.


The iPad saw 17% growth driven by the iPad Pro, but the big positive narrative from the company was that of wearables, which include Apple Watch and AirPods. The company saw 54% growth in that category, and the quarter in question ended before AirPods Pro were announced or released.


In an answer to an investor question, Cook let it be known that he sees wearables like the Watch and its associated health functionality as the future of the company. "There will be a day in the future that we look back and Apple's greatest contribution will be to people's health," he said.


Some investors are understandably concerned that many of Apple's growth areas are dependent on the iPhone. Users are sticking with their existing iPhones and opting going longer between upgrades than ever before, leading to ever-slowing iPhone sales. But Apple stock rose slightly after the call regardless, indicating that the market at least believes Apple still has plenty of room to grow in services and wearables in the near term before the iPhone's slowing momentum becomes a serious problem.


And in some cases, the numbers bear that out: a substantial portion of Apple's wearables revenue (which now stands toe-to-toe with the Mac) comes from customers making a first-time purchase in that category. And Cook again made vague allusions to major new products in the wearables category, which (not his words) could include the company's rumored augmented reality headset.


Despite those declining iPhone sales, Apple users probably shouldn't be too concerned about the future of the ecosystem they've invested in. The company stated earlier this year that it has an install base of 900 million iPhones globally. Whether that continues to grow is a concern for investors looking for big returns in their portfolios, but not for users; an install base that size all but ensures continued support, content, and updates for many years yet.


Looking ahead to Q1 2020, Apple projects revenue between $85.5 billion and $89.5 billion—Q1 is often a big quarter for the company, as it carries holiday sales and much of the immediate post-launch revenue from the new iPhone lineup.



Source: Apple earnings Q4 2019: Tim Cook says health will be what Apple is remembered for (Ars Technica)

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