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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Comments (66)

66 responses to “Apple Delivers a Blockbuster Quarter, But…”

  1. Daishi

    Is it any wonder that, in a quarter where the available models had well publicised, significant hardware issues and ran on outdated chips and where the market widely expected an imminent update in which they would fix both of these issues, they saw reduced Mac sales? If anything I'd call a 13% decline surprisingly good.

  2. matsan

    Regarding Mac-sales: I held off from buying the old version and just put my money down for a 15” MBP. Will be interesting to see the figures for new quarter.

  3. MikeGalos

    iPhone sales being flat for the quarter year-over-year is a worse sign than it looks when you remember that a year ago sales were in a slump as the rumors of the iPhone X were everywhere and people were holding off buying while they waited for the September announcement.

  4. harmjr

    It makes me think if they would some how release a Apple App Store (iTunes) for Android and PC would it make more money then Google Play and Microsoft Store? Would people trust it more?

  5. dballecer

    Well.....keep in mind that Apple released new macs and iPads at the beginning of this same quarter last year, while not releasing any new iPads during this one (and new macs just a couple of weeks ago). In any event, I’m happy to see Microsoft doing well and I applaud their direction on their hardware. Maybe someday we in the Apple ecosystem can finally get touch on our macs. If only Apple knew about touchscreen devices.......

    • SenorGravy

      In reply to dballecer: They released upgraded macs and iPads of the same basic design for several years. In the case of the Macbooks, not even changing the things that even the most die hard Apple fanbois complain about. One of the reasons I personally have transitioned back to Windows and Android: Products that are flawed at best, and boring at worst, not to mention they have slowly and surely removed features that I really liked and used (headphone jack, USB-A ports, magsafe, even the CD/DVD player several years ago). I am suffering from Apple fatigue.


  6. TEAMSWITCHER

    I'm not worried about Mac Sales... Mac users are a patient bunch. I had no desire to upgrade my 2015 13" MacBook Pro to either the 2016 or 2017 models. It had nothing to do with the controversial keyboard or the touch bar and everything to do with performance. There simply wasn't enough extra performance to justify an upgrade. Now that we have quad-core 13" MacBooks and six-core 15" MacBooks, upgrading is far more compelling. I'm certain that many MacBook Pros will be sold this fall. I will be buying one.

    • Manuth Chek

      In reply to TEAMSWITCHER:

      I'm on this late 2013 MBP 15" and I don't see the reason to change either. The touch bar would be useful but then this machine already works okay for my needs so I'm not wasting my $$$.

    • fbman

      In reply to TEAMSWITCHER:


      I agree, personal computing technology has matured and people are waiting longer to upgrade as there no real need anymore.


      I think the same is happening in the PC market, part of the reason for "bad" pc market is people wait longer to upgrade or replace. My Pc is six years old now (ok I custom build my pcs and dont buy off the shelf), and its still runs all the software and latest games available today, so I am not in hurry to upgrade as the machine meets my needs as a power user. I am looking into replacing my hard drives this year.


      For your regular non power user, I am sure the same is true, if you can access you email, facebook and type a document in word or do a spreadsheet in excel, there is little reason to upgrade or replace unless there is a hardware failure.


  7. Michael_Miller

    So, Thurrott gives Apple a “but” in an astounding quarter. Apple’s market cap may reach $1 Trillion today as their stock price is up almost 30% year to date. Apple dominates the mobile market as it has sold more than 50 million consumer devices in just one quarter (phones, tablets, watches). MS wishes it could get just a fraction of these numbers. Yeah, that is a But.

    • Winner

      In reply to Michael_Miller:

      You don't dominate the world market when your share is under 20%. Even in the US, Apple is now under 50%.

      • Michael_Miller

        In reply to Winner:

        Okay, but I will take Apple’s results over anyone else, I.e., trillion dollar market cap, enormous profits, and outstanding profit margins. Any metric you use, Apple is pretty much on top. MS’s shareholders can only dream of returns that Apple produces. In financial terms and wherewithal, Apple dominates.

    • Stooks

      In reply to Michael_Miller:

      "Apple dominates the mobile market"


      No they do not. In the US they have something like 53%? World wide Android has 85%.


      Apple is making crazy money for sure. Their strong points are iOS based devices (iphone, ipad, iwatch, apple tv, homepod) using their services. The Mac division is the odd man out these days. Crazy pricing, crazy form factor choices. The result is professional users abandoning the Mac.


      I predict they will have a touch based Mac by 2020 running iOS on their own ARM chip for Mac's (bigger more powerful) and they will ditch the x86 world. I think by then it will work for them. Most Mac users I know could use an iPad for their computing needs (web surfing, email, photos, hey look at me I have a cool Mac). If it does not then no big deal since they would lose at most 10% of their revenue. Doubtful they would lose 10% as the loyal...cult members will buy and vehemently defend to a embarrassing fault anything Apple does.

      • pecosbob04

        In reply to Stooks: >"Apple dominates the mobile market"

        Maybe he just meant dominates the profits in the mobile market.


      • robsanders247

        In reply to Stooks:

        “The result is professional users abandoning the Mac.” I’m not seeing this happening. What I do see is many professionals not upgrading their 2015 MacBook Pros (or earlier) until now. But with the improved reliability of the keyboard and the new CPUs, I’m sure they will get one in the next quarter or so. The new models arrived very late in the quarter, so a decline in numbers is not that bad.


        I do not think we’ll see Apple abandoning macOS for iOS. I do think that ARM will be the future, once multi-core performance is even better than now. I think if they already had an ARM-based version of macOS, they would have delivered that already on the MacBook. And I’m certain we’ll see more iOS apps crossing over to macOS. But I don’t think this will replace native macOS apps that benefit from the additional functionality that native apps bring.

        • Stooks

          In reply to robsanders247:

          "But with the improved reliability of the keyboard and the new CPUs"


          Oh you mean the Throttlebook Pro's? With their new fix that never lets them go above base speed when running CPU intensive loads so they wont throttle.


          My daughter leaves for college in a few weeks. I was going to buy her a Macbook, 2018 13inch even though they cost $1799 with 8th gen CPU, 8gigs of RAM and a 256gig SSD. She did not want one. Her private high school used Lenovo touch screen laptops for her 4 years. First two years on Windows 8 and the last on Windows 10. She said she wanted a touch screen and OneNote. The Mac was out.


          I got her a Lenovo Yoga 920 directly from Lenovo. $1599, 8gen CPU, 16gigs of RAM, 1TB SSD, 4K touch screen, and their new pen (version 2). USB-C (thunderbolt 3) and USB-A ports. The Pen works really well with OneNote. Her school uses Office 365/OneDrive, just like her high school did. A 13inch Mac with those same specs would have cost me $2599 (16gig, 1TB SSD) no 4k, no touch, no pen. I got her another power adapter so she can leave on in her dorm room and one in her bag.


          Only a few of us have updated our Macbooks. The keyboard is not popular. Nor is the lack of USB-A ports. The loss of the magsafe is a huge. The touchbar is a gimic and I wish I could have gotten the old buttons and the old keyboard. Thankfully work paid for it.

  8. Bob Shutts

    It's fun to visit Paul's forums and relive the OS wars of the eighties.

  9. dstrauss

    And everything after the word "but" is somehow relevant to what? Paul, that is all irrelevant. Until anyone else can command the gross margins Apple does, the competition can keep up the pipe dream of the sky is falling, as all of your "buts" do, and they don't matter. Period.


    Combined, Samsung and Huawei outsold Apple THREE to ONE, but couldn't match Apple's margins. All of the bad haircut advertising in the world won't make a difference. As the old saying goes, if you're not the lead sled dog, the view is always the same...

  10. skane2600

    I think it's pretty clear that Apple is just going through the motions with respect to Macs. They don't seem to think Macs have much of a future and if they stay on their present course they won't.

  11. Winner

    Apple used to be about premium hardware, but recent Mac models have been subpar. And their ancient formfactors are badly in need of a refresh.

  12. 2ilent8cho

    But of the 3.6 Million Mac's they sold, 60% were to people who had never had a Mac before! So their base could very well be growing (I'm guessing they can use Apple ID's to tell). Must be those running a mile from Windows 10. Existing Mac users will still be happy with their devices from 2012 and 2013, i know i am, just no need to get a new one. Last year Apple said they are almost at 200 Million active Mac users , Mac usage is growing.

  13. jm2016

    The smartphone market is healthy when you make money on every unit. Apple succeeded in maintaining unit sales, and crashing through the $1000 barrier. The iPhone X is a clear hit, not by being the best selling phone in the line up, but by pushing the ASP for an iPhone up to $724 vs $606 a year ago. It will be interesting to see if other manufacturers can make in-roads on the new high end of $1000+ phones.


    The smartphone market seems to have reached maturity, with steady sales and a pretty well defined replacement rate in the 2-3 years range. Growth is going to come from pushing at the high and the low ends of the price sprectrum.


    The tablet market is interesting too. I’m not sure there IS a tablet market, more like an iPad market (I think Surface is a new PC form factor vs a tablet). It seems that iPads are on the old PC replacement cycle of 3-4 years now, and PCs (and Macs) are on more of a car replacement schedule of 5+ years.



  14. Jeffsters

    Apple is doomed! This is the beginning of the end for Apple! ...uh huh...

  15. GarethB

    This largely then comes down to profit vs market share.

    Apple is making a shed load on a reduction in market share. If you're a finance guy (or an Apple fan) this is excellent.

    For everyone else Apple is selling a bit less of their hardware - or at least *was*... With product upgrades the Macs are likely to pick up somewhat, and a more competitive smartphone market should force/encourage all (including Apple) to do more to earn our money.

  16. red.radar

    Is the implied statement that Huawei is stealing customers from Apple, or we just noting they are rising and taking market share from other android makers such as Samsung?


    Also I wonder if the decline of Mac marketshare is the result of loosing sight on the professional customer. The Mac Pro was a disaster.. Not to mention a lot of "creatives" have good options besides Final Cut Pro.





  17. curtisspendlove

    I’m not too surprised Macs we’re down. I’m actually impressed they weren’t down more. With the new quad-core 13” I have a reason to replace my older 15” (which I bought because you couldn’t previously get a quad-core in 13”).


    That said, I’m waiting to see what the performance of the new Mini (assuming the refresh rumors are accurate) is like. I’d like to see that upgraded to a quad-core with at least 16gb RAM. I’m hoping for a thunderbolt 3 port and eGPU capability.


    Whichever machine gets me closer to that is going to be my new production machine (with some gaming on the side).

  18. Grant Cunliffe

    Apple you may not be perfect but you are pretty impressive for sure with the performance you achieve.

    A proud American brand when things aren’t so proud in other areas.

    Fascinating as a visiting Antipodean going to the Microsoft Store on 5th Avenue NY and it was pretty lacklustre.

    The Apple Store nearby was heaving with people.

    Thought I would see lots of Microsoft laptop in the cafes and lots of Samsung Galaxys but just saw MacBook after MacBook and iPhone after iPhone.

    Noticed lots of Airpods in use which encouraged me to buy some on return to New Zealand - love them. Who said there was no innovation from Apple after Steve Jobs.

    Been a Microsoft user since DOS days and rate Windows 10 and Surface but heck it would be dull world without some Apple magic.


    • MikeCerm

      In reply to Letsmakeitbetter:

      "A proud American brand" that builds all its products in China, makes billions in profit yet pays no taxes, and stockpiles hundreds of billions of in cash overseas rather than returning it to shareholders. It's everything that's wrong with America!


      But seriously, Apple was an essential competitor when Microsoft needed one, and they will be an essential competitor for Android too. Now they just need to start competing, rather than coasting on their successful innovation 10 years ago.

      • Jeffsters

        In reply to MikeCerm: You really should comment on things you know or check first. Apple is the largest taxpayer in the world and paid over $15 billion in corporate income taxes over the past year, plus billions of dollars more in property tax, payroll tax, sales tax and VAT. They pay taxes to the US at the statutory 35 percent rate on investment income from its overseas cash and Apple’s effective tax rate on foreign earnings is 21 percent. Do you even understand what "return to Shareholders" means? Apple has done major buy backs who do not want Apple to be taxed further bringing those foreign earned funds into the US just as many other companies or forced to forgo when they would like nothing more!


    • localjoost

      In reply to Letsmakeitbetter:

      "The Apple Store nearby was heaving with people."


      How many of those were waiting to get their phone or the notoriously bad Mac Butterfly keyboard fixed? ?

    • jchampeau

      "...but heck it would be dull world without some Apple magic."


      I agree with this sentiment. Apple makes good stuff, and some of it is even "magical." While none of their current products rise to that level in my opinion, they do encourage and inspire other manufacturers to up their game and compete. And we all benefit from that.


    • Andi

      In reply to Letsmakeitbetter:

      Something all of you forget. Apple is the only tech company that enjoys a veritable cult of personality. Its devices are not just great devices in their own right, they are also must have status symbols.

  19. Prebengh

    How can it be that the smartphone sale declined year-over-year and Apple lost marketshare, yet it sold more (although not by much) phones than the same quarter last year?

    Regarding the Apple Watch and the other products business, it is interesting to note that it is 2-3 times bigger than the Microsoft Surface products quarterly sales.

    • Avro

      In reply to Prebengh:

      Actually they sold about 3 million iPhones year on year. You are confusing. ‘Shipped’ with ´Sold’. They reduced the inventory by more than 3 million units, so 3+ million more were sold than shipped.

  20. cybersaurusrex

    Dear Microsoft,


    Apple won.

  21. Stooks

    Windows PC's, Apple everything else for me.


    I have 1 Mac, a 2014 loaded Mini that I own and it works fine for what I use it for (home server). I also have a 15inch Macbook Pro from work, 2017 but I simply hate the keyboard and the dongle hell I have to live with when using it.


    Apple seems to be pushing Mac's away from consumers. Jacking the price crazy high (new 13inch 8th gen starts at $1799) and they have never been in the "Form over Function" more than they ever had with the latest Macbook's. Throttlebooks because they just have to force the thiness.

  22. cseafous

    Interesting.

    Microsoft says don't by the iPad if you want to get real work done and now they can't get people to buy iPad like devices.

    Apple says no one needs a tablet for getting work done and now they can't get people to buy a productivity tablet.

    • SenorGravy

      In reply to cseafous: This is fallout on Microsoft's part for Windows Phone's failure. Nobody wants full blown windows on a tablet. Microsoft should have used their mobile OS for surface, or at the very least, made Windows RT NOT look just like regular windows.


      • gabeburke

        In reply to SenorGravy:

        That is a woefully misguided statement.

      • Dashrender

        In reply to SenorGravy:

        You can say that again - the fact that Surface RT looked just like Windows was what killed that platform form the get go. Wait, what? It looks like windows yet can't run Windows apps? forget this.


        As for Windows on a tablet - what's a tablet exactly? you mean a slate computer - i.e the Surface? I completely disagree. I think there are many would would like this, as long as it works well - and the number of complaints on the Surface are super high, so I think this is a a device failing, not a desire failing.

  23. tommorton14

    Its amazing how much money Apple makes. They barely care about the Mac and yet it generates over 5 billion in revenue for the quarter. Surface after 5 years is still around one billion.

    • Dashrender

      In reply to tommorton14:

      This is not a fair comparison, unlike Windows based devices, there is no other market/maker for Apple based products. MS with the Surface is competing against a dozen plus makers of Windows machines. The fact that their numbers (1 Billion) is low is pretty meaningless.

  24. jules_wombat

    When will Tech Journalists start to understand that the future is about Services rather than Devices. That is why Microsofts storming perfomance is down to Azure and very little to do with Surface or indeed platform OS stuff anymore. Smartphones are now commodity items, about as interesting as Fridges.

    Get with the program: We need more articles on Azure and Cloud Services as that this where the Future of Microsoft and Tech in general.

  25. melinau

    TBH I'm not really that concerned about Apple, except from an intellectual or analytical point of view.

    The Company, never a hotbed of innovation, is coasting. Its "pipeline" probably excites Mr Cook because it will further fill Apple's over-stuffed coffers, but likely will be devoid of anything technically important or interesting.


    In respect of Apple's ability constantly to raise prices & profits, that, like the Emperor's new clothes is likely to have a relatively limited shelf-life. As we have seen with their PCs, even Apple customers can become resistant to being milked as cash cows: paying premium prices for mediocre and \ or out-of-date kit.


    In the meantime I expect Apple to carry-on making huge profits, increasingly, as the figures show from their Walled-Garden Services. This was always their play, at least when Jobs was around. Jobs' marketing skills and business acumen correctly guessing that this would be their future.

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