Apple Delivers a Blockbuster Quarter, But…

Posted on August 1, 2018 by Paul Thurrott in Apple, iOS, Mac and macOS, Mobile with 62 Comments

Tuesday night, Apple reported yet another record quarter with double-digit growth. And yet Huawei also surpassed it as the second-biggest smartphone maker.

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth,” Apple CEO Tim Cook is credited with saying in a prepared statement. “Our … results were driven by continued strong sales of iPhone, Services, and Wearables, and we are very excited about the products and services in our pipeline.”

Apple posted a net income of $11.5 billion on revenues of $53.3 billion, the latter of which is up 17 percent year-over-year.

Apple’s ability to sell iPhones remains impressive: The firm shipped 41.3 million iPhones in the quarter, roughly flat with the same quarter a year ago, when it sold 41 million units.

In a post-earnings conference call, Mr. Cook referred to the smartphone market as “very healthy,” which is a curious assessment: In the quarter ending on June 30, smartphone sales declined year-over-year and Apple lost market share. Worse, China-based Huawei surged past Apple with 54.2 million smartphone sales, despite being essentially locked out of the U.S. market. So Huawei is now the number two smartphone marker in the world, behind Samsung (71.5 million units) and ahead of Apple.

But iPhone, finally, isn’t Apple’s only major business, at least not directly: Where this product once accounted for over 70 percent of Apple’s revenues, the iPhone this past quarter accounted for just 56 percent of revenues. The reason? Services revenues surged by 31 percent to about $9.6 billion.

Of course, those services revenues are largely consumed by iPhone users. When combined, iPhone and Services do account for 74 percent of Apple’s revenues.

The smartphone market may or may not be “very healthy,” but Apple is having trouble selling Macs all of a sudden: The firm shipped just 3.7 million units in the quarter, a double-digit decline of 13 percent year-over-year. This happened in a quarter in which PC sales, overall, actually rose by about 2 percent, to 62 million units. So the Mac’s market share has fallen to 5.97 percent. I don’t believe Mac market share has been this low since the early 2000’s.

Worse, Apple’s “post-PC” solution, the iPad, is also coasting: The firm sold 11.55 million iPads in the quarter, flat with the same quarter a year ago. But iPad revenues fell 5 percent, which may indicate that buyers are rejecting the pricier and PC-like iPad Pro for the less expensive, entertainment-based basic iPad.

Finally, Apple’s “Other products” business, which includes Apple Watch, Apple TV, and other outliers, saw revenue growth of 37 percent to $3.7 billion. This is Apple’s smallest business, and the firm doesn’t provide unit sales for any of the products it contains. But Mr. Cook indicated that Apple Watch sales grew in the quarter somehow.

 

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