Apple Hits Another One Out of the Park

Posted on November 1, 2018 by Paul Thurrott in Apple, iOS, Mac and macOS with 25 Comments

Apple posted another record-setting quarter today, with a net income of $14.1 billion on revenues of $62.9 billion for the period ending September 30.

“We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our 2 billionth iOS device, celebrated the 10th anniversary of the App Store and achieved the strongest revenue and earnings in Apple’s history,” Apple CEO Tim Cook said in a prepared statement. “Over the past two months, we’ve delivered huge advancements for our customers through new versions of iPhone, Apple Watch, iPad and Mac as well as our four operating systems, and we enter the holiday season with our strongest lineup of products and services ever.”

Looking at the product lines for which Apple does provide hard numbers, we see the following.

iPhone. Apple sold 46.9 million iPhones in the quarter, roughly flat with the 46.7 million it sold in the same quarter a year ago. But Apple’s newest iPhones barely registered—the iPhone XS and XS Max were only available in the last week of the quarter and the iPhone XR shipped afterward—so things should improve dramatically in the current quarter.

iPad. Apple sold 9.7 million iPads in the quarter, down 6 percent from the 10.3 million it sold a year earlier. Worse, the iPad’s ASP must have fallen too, since revenues were down 15 percent YOY. Apple did just launch a new iPad Pro, but I don’t expect that to impact its results in a major way going forward.

Mac. Mac sales also fell in the quarter, from 5.4 million units a year ago to just 5.3 million units. That said, Apple just launched new and long-awaited MacBook Air and Mac Mini upgrades, so this quarter might see a boost.

Services. Apple’s services business hit an all-time high of $10 billion in revenues, an increase of 27 percent YOY.

Apple says it generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter.

Also, I’ll point out that the iPhone is now responsible for 59 percent of Apple’s revenues. But if you add in Services, the entire iPhone ecosystem represents about 68 percent of the company’s revenues. This is a bit lower than in previous quarters, but Apple is still very much the iPhone company.


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Comments (25)

25 responses to “Apple Hits Another One Out of the Park”

  1. MutualCore

    I guess the only positive for Microsoft is Apple's earnings where not 2x as much for a change.

    • jrickel96

      In reply to MutualCore:

      No, the positive for MS is their revenues are much more diverse. As Paul said, 68% of Apple's revenues are iPhone dependent. Google's revenues are 87% from ads. AWS is only 11% of Amazon's revenue.

      Between Microsoft, Amazon, Google, and Apple, Microsoft has the most diverse revenue sources. This means they can weather storms better. For instance if there's a major paradigm shift and people move from phones and there's a large drop off (like 10%) then that will impact these companies greatly.

      Microsoft's revenues are also more stable because most of them are built of contractual spending or subscription.

      All four of these companies are doing AMAZING, but Microsoft is the most solid due to the diversity of revenues.

      • provision l-3

        In reply to jrickel96:

        "For instance if there's a major paradigm shift..."

        So, Microsoft had the advantage of being more diverse when the last big "paradigm shift" happened which was the smartphone. At the time Apple was just the "iPod company" that also sold Macs and Google just had search. Fat lot of good that diversity did Microsoft but it is a good line to tell yourself if you are a fanboy that loves a company. What would be really good is if folks like you and MutualCore just gave up your emotional attachment to companies and the us us and them mentality.

        • Sprtfan

          In reply to provision l-3:

          I think you missed the point. It is not about finding the next paradigm shift, it is about being able to survive a shift if it happens. This is about looking at the future not the past. If another shift happens, Microsoft maybe better position to survive it than companies that are a one trick pony. Those companies might lead the transition and be fine or could become the next Nokia or BlackBerry. Being diverse will not help you predict a shift, but will help you stick around after.

          • provision l-3

            In reply to Sprtfan:

            I got the point I just disagree with it. Microsoft missed a large shift in mobile phones and ultimately went from being a big player in the the smartphone market to being kicked out. That really wouldn't have been a big deal had the shift not had a broader impact which was people using and consuming P.Cs less. If you remember back to that time Microsoft's revenue took a bit of a hit. They certainly weren't in danger of going away but it wasn't exactly good times either. They then went into a bit of a tailspin and tried some "me too" products (phones, Band, several failed starts at a touch based OS). What really got them on their footing again and to where they are today was catching the services/cloud computing shift early. So, it wasn't their diversity in products that helped them it was catching a shift and capitalizing on it.

            I'm not trying to beat up on Microsoft here, great company and great products. I'm just offering a sober assessment and that was that they had a rough patch for a few years as they struggled to catch on to changes in technology sector.

            Ultimately my point is that there is not a one right way to do things. Microsoft and Apple have more or less been around the same amount of time. During those many decades Apple has largely been a "one product" company and Microsoft has had its finger in may pots. Both companies have had successes and rough spots and both are still thriving. Two different models and both are working. Weirdly people are still keeping this dumb Apple vs. Microsoft thing alive and well even though the companies really don't even compete any more.

            • pargon

              In reply to provision l-3:

              Actually, if you look at the profits of Microsoft they did EXTREMELY well during that paradigm shift, start of smartphones. Steve Ballmer was a great CEO as far as maximizing revenues and profits, but the market had decided it didn't like him. Maybe because he missed the trend or Windows Vista, or various other swings and misses.....but Microsoft's financials were amazing, something like 3x-4x increase to the business throughout his tenure.

              • provision l-3

                In reply to Pargon:

                I don't disagree that Ballmer was a great CEO and great CEOs still have their mistakes. You can look at his entire tenure and financials are great but that is 2000-2014 and we are talking about the latter part of that as the iPhone came out in 2007. In that latter part Microsoft had a drop in year over year revenue form 2008 to 2009. 2010 saw an increase from 2009 but was just getting back to 2008 levels. So, yeah, they had a rough patch in there.

            • Sprtfan

              In reply to provision l-3:

              I think you might be the only person that thinks being diverse is not a good thing if everything else is equal. The companies that depended on only one major revenue stream that happened to be cellphone related when the iPhone came out are at best a shadow of what they were. In 2006 Nokia had around 50% market share and look where they are now.

              • provision l-3

                In reply to Sprtfan:

                I'm not even sure how to respond to this one. I'm guessing you didn't bother to read my response because at no point did I argue against being diverse.

                • Sprtfan

                  In reply to provision l-3:

                   Fat lot of good that diversity did Microsoft but it is a good line to tell yourself if you are a fanboy that loves a company. 

                  At best you insinuated that being diverse didn't matter. No one is arguing that a company has to be diverse to be successful, we're saying that it will help them survive a shift when/if it happens.

                  Microsoft missed a large shift in mobile phones and ultimately went from being a big player in the the smartphone market to being kicked out.

                  Yet Microsoft is still around and a successful company because it was diverse. The equivalent of Apple during this shift in mobile would have been Nokia and BlackBerry.

                • provision l-3

                  In reply to Sprtfan:

                  You are correct, I am saying that diversity in itself isn't important and since you seem to think I'm arguing for a one product strategy I'll go ahead and say that in itself doesn't matter. Both rely on execution on the part of leadership to work.

                  You keep beating that Nokia and BlackBerry horse all you want but you really think that there are no "diverse" companies that have tumbled as far? Motorola for example?

                  I get it, Microsoft is perfection in your mind. Sorry I touched the sacred cow.

                • Sprtfan

                  In reply to provision l-3:

                  Diversity is not important in helping you find the next paradigm shift and no one is saying that. It helps protect you from one that you miss.

                  Obviously a poorly ran company will fail no matter how diverse it is and Motorola made several missteps along the way. No one is saying that being diverse makes you invulnerable. It can just buy you time to right the ship.

                  From my stand point this has nothing to do with Microsoft and has always been a more general statement about putting all your eggs in one basket. I'd love to have the biggest basket of eggs but you might be in trouble if it is ever dropped. There is a good chance that Apple or Google never drop their basket, or are able to diversify some before it does. It just is an example of one of the only things that MS has going for it compared to the two.

  2. locust infested orchard inc

    Some excellent responses in the comments to the financials of Orchard Inc., and whilst I agree the Cupertino trillion-dollar entity is by-and-large profitable due to sales of the older iPharce and newer iNotches, it has done particularly well in selling its services, an increase of 27% year-on-year is certainly very noteworthy. This will ensure the longevity of Apple's profitability by maintaining its core faithful iSheeple to iDevices.

    There will however come a time when the traditional smartphone market will decline, that's when Apple will begin to stagnate and decline without another globally bestselling device. Such a device may well be a chimera between the iNotch and the iFad – the iFold – a foldable Apple device that behaves as an iPharce, but when unfolded, a ~8.5" iFad results. Such a device is expected in 2020, according to an analyst for Bank of America Merrill Lynch, who commented in March 2018.

    That said, Apple will be late to the foldable party, as Huawei, Lenovo, LG, and Samsung are all reported to be releasing in 2019. But with these being &rude devices, the foldables from the aforementioned may just be a novelty as &rude tablets have been thus far a failure.

    We can all safely bet the iFold will be a sensational success, probably priced above the $2000 mark, and Apple will once again be raking in with astonishing revenues, bringing renewed investor confidence.

    But will the iFold have significant competition from the forthcoming Surface Foldable™ ? Without doubt, as the size of the display increases, the advantage of having Windows on the device increases the level of one's productivity over other rival OSes. With Windows Core OS and CShell, Microsoft could well find itself back into contention with a new device form factor, exactly as described by Satya Nadella a few years ago.

    Only time will tell – not long to go now – the Surface Foldable™ is expected between Q4 2019 and Q1 2020.

  3. dontbe evil

    increase the price, invest and produce for same or less money = more profit

  4. provision l-3

    Great quarter for Apple. Unfortunately their guidance for next quarter seems to have caused some folks concern.

    • MikeGalos

      In reply to provision l-3:

      Great quarter on revenue.

      Horrible quarter on units and market share.

      At some point you can't just keep raising prices to make up for lost share and Apple has been losing share for quite a while now.

      • provision l-3

        In reply to MikeGalos:

        Yes, it turns out businesses goal is to generate revenue. The one's that don't fair so well. So, it was a great quarter.

        I don't think the unit sales were horrible, mostly flat but if you think mostly flat is "horrible" then you likely think a lot of companies are doing horrible. You are totally welcome to your viewpoint. You are also overlooking the Services and Other categories which grew 17% and 30% respectively which I think is respectable growth especially when you consider that the Other (watch, HomePod and AppleTV) now generate more revenue than the iPad.

        On your last point, marketshare doesn't really have much to do with revenue. Revenue is going be more closely tied to unit sales. Unit sales can go up while marketshare goes down or unit sales could go down while marketshare goes up. So while marketshare can be a useful number in looking at the success of a product it really isn't meaningful when it comes to revenue.

  5. FalseAgent

    I wonder, at what point does "success" enter "grotesque excess" territory? It feels wrong to celebrates these earnings anymore to me.

  6. briantlewis

    Pretty amazing if you remember the $740 million loss With Gil. Months, if not weeks, from going away.

  7. shameermulji

    So much for Apple products becoming too expensive

    • MikeGalos

      In reply to shameermulji:

      Actually that's exactly what it's saying:

      iPhone sales flat

      iPad sales down

      Mac sales down

      They're raising prices to gut the people trapped in their ecosystem while losing customers who can leave.