Surprise: Apple Delivers Another Blockbuster Quarter

Posted on May 1, 2018 by Paul Thurrott in Apple, iOS with 57 Comments

Surprise: Apple Delivers Another Blockbuster Quarter

Image credit: Getty Images

Despite rampant reports that the iPhone X was not selling as well as Apple had hoped, the firm delivered another blockbuster quarter.

“We’re thrilled to report our best March quarter ever, with strong revenue growth in iPhone, services and wearables,” Apple CEO Tim Cook said in a prepared statement. “Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter. We also grew revenue in all of our geographic segments, with over 20 percent growth in Greater China and Japan.”

Every sentence in that quote is aimed at Apple’s naysayers, which have spent the past few weeks raising questions about the success of the iPhone X, Apple’s viability in China, and whether the firm has finally peaked.

We’ll get to that in a moment. For now, here are the numbers.

Apple earned net income of $13.8 billion on revenues of $61.1 billion; that latter figure is up 16 percent year-over-year.

Apple sold 52.2 million iPhones in the quarter ending March 31, a 3 percent jump over the 50.8 million sold in the same quarter a year ago. Sales of iPads were up 2 percent, to 9.1 million units. Sales of Macs were down 3 percent, to 4.1 million units. And Apple’s services business surged 31 percent to $9.2 billion.

That Apple sold many millions of iPhones is not surprising, and the firm consistently beats earnings estimates. But what we’re looking for in these results is some indication that iPhone sales are sagging. And, in particular, whether the iPhone X is a flop … within context.

Heading into this week, several of Apple’s component suppliers—Corning, Samsung, SK Hynix, Taiwan Semiconductor Manufacturing, and Teradyne—all hinted that Apple had cut back on orders, in particular for the expensive iPhone X. This is important because Apple now derives over 62 percent of its income from the iPhone. And if you factor in iPhone-related services, the figure jumps to over 75 percent. Apple is, in many ways, the iPhone company.

The relative lack of success of the iPhone X has triggered angst in Wall Street. Worse, it’s impacted Apple’s stock price and market capitalization. Once cruising toward a $1 trillion market cap, Apple’s stock has tumbled 15 percent so far this year because of the iPhone X. And some now believe that another company, perhaps Amazon or even Alphabet/Google, will reach a $1 trillion market cap first.

But these results speak for themselves. As they always do.


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Comments (57)

57 responses to “Surprise: Apple Delivers Another Blockbuster Quarter”

  1. thisisdonovan

    I'm always surprised when these results are released.... the mobile market is so mature it's just a matter of time for the sales to plateau and eventually fall slightly as people inevitably realise they don't have to upgrade $1000 phones every year....

    But not yet.

    Quite amazing for apple.

    • DeusFever

      In reply to thisisdonovan:

      Apple has sold more every year for the past 11 years. I've been hearing expectations that iPhone sales will plateau each year of those 11 years. Mere wishful thinking is no match for the Apple brand. At this point, the only way iPhone sales will plateau is if the population drops.

      • RR

        In reply to DeusFever:

        This track record is seriously impressive, rare in length and unprecedented in scale. But once you hear the shoe shine boy repeating what you just said, sell everything.

    • NT6.1

      In reply to thisisdonovan:

      Not yet? The smartphone market is mature since 2016.

    • GT Tecolotecreek

      In reply to thisisdonovan:

      You assumption is people upgrade $1000 phones every year. They don't. But Apple has a large enough base (>1B) to always have a large portion of that group moving into an upgrade cycle, plus the switchers from Android.

    • curtisspendlove

      In reply to thisisdonovan:

      As much as I love my iPhone X, I’m also surprised. I didn’t expect it would outsell the rest of the line.

      Honestly, there are few things the X does better than the 8. And most people with a 7 don’t need to upgrade to an 8, let alone an X.

      I know that car analogies don’t work well for tech, but to me it is an apt comparison here.

      It shows that a lot of people are willing to pay for a Porsche instead of a Civic.

      • Jorge Garcia

        In reply to curtisspendlove:

        I hardly considering it outselling the rest of the line, when the rest of the line is mostly comprised of variants of the same thing. Setting aside the budget SE, to the average consumer, the differences between the 8,8+,7,7+ are all pretty negligible...the people choosing between those four are mostly shopping by price (and size preference) at that point. All four phones below the X merely represent "flavors" of the "traditional" iPhone 6 style phone, and when you combine their sales into one, I am sure they dwarfed X's sales. That being said, the significantly pricier X did sell well enough (20-25% share?) to significantly push up the ASP, but it's interesting that a lot of that gain was shed this quarter, suggesting a dive of some magnitude early in the year. Perhaps the usual yearly dive, but perhaps not.

    • MikeGalos

      In reply to thisisdonovan:

      I don't see that this says anything about the mobile market not plateauing. iPhone and iPad sales were, essentially, flat which is disappointing for a year with a major announcement. The only big winner is the Apple services business.

  2. Stooks

    I am surprised you are missing the point here. These rumors from these "sources" are nothing but a PURE stock manipulation play. 1000%. These same companies have been doing this since the iPhone 5 at least.

    They use the fact that coming off the holiday sales all consumer electronics drop. Every time the truth is not even remotely close to what they have said. They don't care, the stock drops they trade and make money off those trades and do it again next year.

  3. innitrichie

    It's now clear from these numbers that there's this huge opportunity for a new premium Windows Phone. I can't wait for //build/ to see what Microsoft has planned for us.

  4. nbplopes

    The rumours were around Apple selling iPhone X's less than Apple predicted. From that, the "negative" minds speculated that the iPhone line was failing, which is clearly not the case. Even if it sold less than Apple predicted, was just enough to be the leading sales phone in the iPhone line. That in turn had record produced record breaking revenues.

    "Since we split the iPhone line with the iPhone 6 and iPhone 6 Plus in 2014, this is the first cycle we've ever had where the top of the line iPhone model has also been the most popular."

    This one makes me wonder:

    "Tim Cook: In terms of the market in general, if you look at last year, there were still half a billion feature phones sold in the world. Many of those sold into emerging markets. Not all of them, but many of them. We still believe that over time, every phone sold will be a smartphone. It seems to us that with many feature phones being sold, that's a pretty big opportunity. In terms of the iPhone itself, even though we sell quite a few phones across the course of a year, our market share globally is low — sales are low compared to the whole market. Our goal is to convince people with another type of phone to switch, while taking care of people with an iPhone so that when they elect to buy another phone that they buy another iPhone. So we spend quite a bit of time on that ... India is third-largest smartphone market in the world. Obviously huge opportunities there. Extremely low share in that market overall. We're putting a lot of energy there. Working with the carriers in that market and they're investing enormously on LTE networks. Infrastructure has come quite a ways since we began to put a lot of energy in there — thanks to their leadership and so forth. I don't buy the view that the market is saturated. I sort of think the smartphone market is the best product category in the history of the consumer world. "

    This the Tim Cook vision. Apple is the new Nokia. Or this is a smoke screen :)


  5. Jeffery Commaroto

    Every quarter the “iPhone is finally in trouble” football is pulled out and headlines appear all over the Internet. Every quarter Tim Cook appears, makes it rain and drops the mic and watches as everyone kicks empty air and falls.

    In three months we will be here again. When will we all learn?

  6. Chris_Kez

    "The relative lack of success of the iPhone X has triggered angst in Wall Street. Worse, ...Apple’s stock has tumbled 15 percent so far this year because of the iPhone X."

    I think it would be more accurate to say that rumors about iPhone X sales have negatively impacted Apple's stock. Some of this is likely stock manipulation.

    As with Apple Watch, I think we can safely and legitimately move past the "failure" language.

    • GT Tecolotecreek

      In reply to Chris_Kez:

      Strategy Analytics is reporting IPX was the best selling smartphone in CYQ1, with 16m units worldwide.  iPhone 8 and 8 Plus taking 2nd and 3rd place. Think we can safely and legitimately move past the "failure" language for the IPX also.

  7. MikeGalos

    This really is burying the lede.

    The BIG story is that while iOS and macOS products were flat, Apple's major growth was in their SERVICES business.

  8. Tony Barrett

    Apple are pretty much a one trick pony, and they've been playing that trick for a long time now. The Mac is a side note and the iPad is less important - the iPhone is Apple's business. The X was a gamble on design and pricing, but they kept the more traditional 8/8+ in reserve if their customers decided they didn't like the X. Whatever happens though, the 'trick' Apple are playing is continuing to work. Their customers seem happy essentially buying the same product over and over, loaded with Apple's draconian restrictions and control, their eye-watering prices, care packages and repair costs, and good old iOS, that hasn't really changed in, well, forever. How long can they keep playing this trick exactly? It seems for as long as the blind loyalty of their followers carries on and the dollars keep rolling in.

  9. jimchamplin

    LOL iPhone X lack of success.

    Holy Christ if only my successes were as profitable as Apple's "failures."

    Edit: iPhone unit sales were up 3 percent. That's pretty measly. BUT PROFITS WERE UP 14%! Damn. What a bucket of fail. The number of iPhone 8 purchases that were successfully upsold to iPhone X was a nonzero number? Damn. What a fail. Damn.

    I repeat: I wish my successes were as profitable as Apples so-called "failures."

    Also, why do any of us have faith in capitalism when Wall Street is so gullible as to believe clickbait on the internet?

  10. melinau

    More years ago than I care to remember it was my contention that Apple would end up making phones to sell Services.

    I feel vindication is close.

    Having "killed" the PC with its iPhone and to a lesser extent iPad, Apple could only ever avoid the inevitable decline of hardware sales (it will happen, just as with PCs) by ensuring its user-base stayed loyal to its Services. It appears to be doing pretty well.

  11. Jorge Garcia

    A 3% YoY growth in iPhone sales is a good accomplishment, but not all too impressive in my view given the current "booming" economic climate. For starters, the World population grows by 1% a year, and the number of people Worldwide who are advancing into a financial situation that could even consider buying an Apple product surely grew by more than 1% (emerging, advancing economies with growing middle classes). Secondly, this year was supposed to be an iPhone "super-cycle" and therefore the fact that there was a small 3% bump could be easily explained by "Pent-up demand" (people who waited out the 7) much more than by newly found enthusiasm for the iPhone in general. Lastly, we are in a massive Worldwide asset bubble right now, where low interest rates are still causing unjustified asset appreciation which in turn causes lots of "unorthodox" wealth to be produced. In times like this, one would EXPECT all those people making large windfalls to spend it on "status symbol" items like iPhones. So, given all those ideal and perfectly-bullish factors in 2018, the fact that iPhone sales only went up 3% is not that really impressive to me. What it tells me is that if/when any leg of that perfect economic stool is removed (or even weakened), YoY gains will not be possible any longer.

    • sglewis

      In reply to JG1170:

      Only one company can announce 61.1 billion in revenue, up from 52.9 billion the prior year same quarter, with a 38.3 % gross margin, 13.8 billion in profit, a stock repurchase of $100 billion (after a recent repurchase of $210 billion), plus the sales of 52.2 million iPhones (most ever), an increase of iPad sales to "just" 9.1 million, a slight dip to 4.1 million Mac sales, services up over 30%, their watch and headphone business alone as large as a Fortune 300 company, and who knows what else because I got bored reading the press release for their quarterly results - and still have others saying "not very impressive".

      Granted, if you sell 10 phones it's a lot easier to double your business year over year than if you sell tens of millions, but seriously?

  12. johnbaxter

    It's always fun to watch the Apple pundits fall over themselves copying each others' made-up bad news.

    Wait...that happens with Microsoft, Google, Amazon, and ... too. The glories of the page view economy.


  13. lvthunder

    So all the rumors were wrong. Shocking. I wish people would just report the facts instead of passing rumors as facts or just flat out speculation.

  14. NT6.1

    Once the smartphone market shifts to the next thing, they will be sorry for not giving attention to the Mac. Look at Nokia. And based on this post and the fail iPhone X is, this is the beginning of the end for them. Microsoft and Steve won't be here to help them again.

    • George Rae

      In reply to NT6.1:

      the Mac and PC’s will never be the next thing, whatever it is good bet Apple will build it and move on. Microsoft will continue it’s thing too, for better or worse.

    • GT Tecolotecreek

      In reply to NT6.1:

      ...and the fail iPhone X is, this is the beginning of the end for them....

      Ahh, it was the top selling iPhone for the past two quarters.

      And what is MS going to do, share their "successful" secrets for selling hardware ala Surface and Win Phone?

    • PincasX

      In reply to NT6.1:

      This reminiscent of the folks that used to say that once the world moved on from the iPod to the next big thing that Apple was in trouble. I think Apple has proven itself to be fairly resilient. Your post also ignores that the Mac, iPad, Services and Other product segments are all large enough to be fortune 100 and 500 companies in their own right.

    • Stooks

      In reply to NT6.1:

      "Once the smartphone market shifts to the next thing"

      Microsoft will be really, really far behind since they completely missed the smartphone wave.

    • curtisspendlove

      In reply to NT6.1:

      “And based on this post and the fail iPhone X is”

      I think you might want to re-read the article and pay closer attention to the quotes.


  15. GT Tecolotecreek

    OMG, pigs fly, hell has frozen over and Paul T. has just taken a big bite of (Apple) humble pie!!

    iPhone Up, Services up, Wearables up, iPads up, China sales up, ASP up, Macs flat. They really need to do a top to bottom refresh of the Mac lineup but I suspect they are still waiting on Intel to deliver. (Shades of the old powerpc delays) Point is when you make solid products, protect customer privacy and have great services to support product use, people will buy.

    • Stokkolm

      In reply to GT_Tecolotecreek:

      How can you say iPad is up and then say Mac is flat? iPad's are up 2 percent and Mac's are down 3 percent, so if iPad's are up how exactly are Mac's flat? Paul has always been (or at least for the last few years) pretty honest in his reporting on Apple IMO.

      • GT Tecolotecreek

        In reply to Stokkolm:

        Numbers Appleinsider is reporting from the earning report:

        Mac sales were slightly down from the 4.2 million reported one year ago, resting this year at 4.1 million. Revenue of $5.8 billion remains static from last year.

        The iPad brought in $4.1 billion in revenue during the quarter, up 6 percent year-on-year from $3.9 billion, with sales of 9.1 million units up year-on-year by 2 percent from 8.9 million. 

        Think the difference is revenue vs units sold. For me, revenue is more important.

        More important, forgot about the $100 billion stock buyback which is huge!

        • Jeffery Commaroto

          In reply to GT_Tecolotecreek:

          The weird power of Apple is also on display as there was almost no change to their PC lineup, the MacBook Air is an aging dinosaur of old tech, they basically announced their Pro is going to be obsolete, etc.

          Meanwhile they will still likely be one of the top five or so PC sellers this quarter. If they would just get their act together, tidy up the line, maybe add a PC or 2 in a realistic price point, they could continue making big $.

          They don’t even have to do much. No touch, no iOS. Just putting a nice display on an Air that is a little less epensive would probably keep them going for awhile.

  16. PincasX

    Apple's guidance was between 60-62 billion and they came in at 61. Anyone surprised by this simply wasn't paying attention.

    I think its funny that Paul is writing this as he wasn't one of those people peddling the "iPhone X is a flop" rumors as fact.

    • GT Tecolotecreek

      In reply to PincasX:

      I think its funny that Paul is writing this as he wasn't one of those people peddling the "iPhone X is a flop" rumors as fact.

      Yep, leader of the pack to the MS faithful. Good for driving page views!

    • Chris Payne

      In reply to PincasX:

      I can't tell if your post is sarcastic, but Paul was indeed quoting iPhone X failure as fact. Many times, and I called it out in comments. But here we are today and he acts like he isn't part of the "Apple naysayers" group he mentions.

  17. skane2600

    Unless Apple breaks out iPhone sales by model, earnings won't indicate the relative success or failure of the iPhone X.

    • Jorge Garcia

      In reply to skane2600:

      I agree. The iPhone 8, which comes in two sizes and therefore can be conveniently split into two different devices if need be, clearly outsold the X when combined and considered to be variants of the same phone. If it had been the other way around, as in the X outselling BOTH versions of the 8 combined, then Tim Cook would have certainly touted that success. Instead, he used the cagey phrase he did, treating the 8 and 8+ as (presumably) second and third runner ups, when they could just as easily be considered one phone which just happens to come in two different sizes. This is an important distinction because it means more people, conceivably by a 2-to-1 margin, preferred the old, less innovative model of iPhone and forewent the insanely high price and the notch of the X.

      • GT Tecolotecreek

        In reply to JG1170:

        By your twisted logic the sales flops Pigel 2 and Pigel 2 XL are "variants" of the same phone? Only thing they have in common is their sales failures.

        • Jorge Garcia

          In reply to GT_Tecolotecreek:

          There are arguments to be made both ways. With the Pixel, at least one can argue that they are two totally different designs, whereas the two iPhones are almost exactly the same thing in two different sizes. The way I see it, either way you look it involves twisting of some kind.

    • PincasX

      In reply to skane2600:

      What do you think drove the average selling price up from 655 last year to 728 this year if not skewing towards the higher end models? I guess you could say the iPhone 8 as it saw a price bump but Tim Cook clearly said that in every week since the iPhone X was released it has been the best selling iPhone. Admittedly vague but it is the best selling iPhone and it is failing then we could presume the rest of the line is failing but they actually sold more year over year. Given what we know, iPhone sales are up modestly, average selling prices had a big jump and iPhone X is the best selling iPhone I think it is hard to paint it as a failure. The better question is how minor or major of a success is it?

    • Stooks

      In reply to skane2600

      Are you that daft?

      Tim Cook in front of the world and the SEC, just made statements to the fact that the X was the top selling iPhone.

      • skane2600

        In reply to Stooks:

        Did he specify a time period where that was the case? Obviously it can't be year over year since the iPhone X wasn't available until November 2017. New models often sell well in the short term but it's the longer term that will determine the ultimate success or failure. I'm not claiming that iPhone X won't be a success, just that it's too early to tell.

        • PincasX

          In reply to skane2600:

          He did and Paul quoted it. Nice job moving the goal posts there.

        • curtisspendlove

          In reply to skane2600:

          “Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter.”

          It is a federal crime to lie or mislead in that phone call. That doesn’t mean it isnt done, but it is a hell of a risk.

          He specifically said iPhone X has outsold all other iPhone models every week since it was released.

          “I'm not claiming that iPhone X won't be a success, just that it's too early to tell.”

          Honestly, it only matters for a year. In the fall they will release the new line of phones, which should outsell the iPhone X.

          So it is about half way through the time period in which it actually matters.

          I think “too early to tell” is incorrect. It is already a success on pretty much any level that matters.

          • Andi

            In reply to curtisspendlove:

            Still, it is for the very first time Apple had 3 new iphones, so, to be a pedant, as long as the 8 and 8+ are close to a third each, the X could be a little over a third.

            This scenario would mean that, relatively speaking ofc, the X sold less in numbers than the best of the 7 or 7+, whichever sold more last year, and at the same time the X sold more than each of the other new iphone it Apple's roster. Finally, thanks to the X' high margins, for the same number of iphones as last year, the profit will be better, and it obviously is.

            • PincasX

              In reply to Andi:

              There are four versions of the iPhone 8 and 8+ collectively and three of them are above the average selling price for the quarter with one barely clearing it. So mathematically that scenario doesn’t work. I’m not saying the iPhone X out sold the 7s just that it had to have sold really well to have a 3% increase in units shipped year over year and a 14% in Read in revenue. The 8s simply don’t cost enough for tht to have happened.

              • Andi

                In reply to PincasX:

                Clamping all iphones together, yoy of course, the X alone doesn't have to outsell the previous best selling flagship model for the overall quarter to still be more profitable. The simple fact that it exists within roughly the same number of iphones sold is enough to increase profits.

                Perhaps analysts and maybe Apple itself were expecting the X to be a stepping stone to a supercycle.

          • skane2600

            In reply to curtisspendlove:

            It appears I didn't read the article carefully enough.

        • GT Tecolotecreek

          In reply to skane2600:

          Did he specify a time period where that was the case?

          Since the IPX started shipping in November, 2017