Apple Quarterly Earnings Report Includes a Huge iPhone Shortfall

Apple announced another impressive financial quarter, but iPhone revenues dropped by an alarming 15 percent, indicating a unit sales drop-off that is much worse than that of the overall smartphone industry.

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” Apple CEO Tim Cook said in a canned statement.  “Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”

Windows Intelligence In Your Inbox

Sign up for our new free newsletter to get three time-saving tips each Friday — and get free copies of Paul Thurrott's Windows 11 and Windows 10 Field Guides (normally $9.99) as a special welcome gift!

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Apple posted net income of $20 billion on revenues of $84.3 billion in the quarter ending December 31, 2018. Those are impressive figures, for sure. But revenues fell markedly from the $88.3 billion posted in the same quarter a year ago.

Apple no longer provides unit sales figures for individual products. So we only have a few data points to work from.

First, iPhone revenues dropped 15 percent to $52 billion. So Apple’s most important business is still directly responsible for 62 percent of its total revenues. Add in the Services business—which is valid since those services only exist because of iPhone—and we see that they together contributed almost 75 percent of Apple’s total revenues.

Interestingly, Apple reported that its other businesses, collectively, grew by 19 percent. Mac, iPad, and wearables all saw revenue increases from the same quarter a year ago.

Apple’s vaunted Services business, meanwhile, continues to grow—it hit $10.87 billion in the quarter, up 19 percent year-over-year. But Services still constitutes under 13 percent of Apple’s revenues. If this business magically doubled, it would still provide less than half the revenues of iPhone. (And that’s never going to happen, at least in the short term, of course.)

Apple also reported that it generated a cash flow of $26.7 billion in the quarter. The firm now has a net cash balance of $130 billion.

Apple expects to post revenues of $55 billion to $59 billion in the current quarter. In the year-ago quarter, it reported revenues of $61.1 billion

Share post

Please check our Community Guidelines before commenting

Conversation 56 comments

  • Daekar

    29 January, 2019 - 6:21 pm

    <p>Ouch. We're solidly into the "not growing anymore" phase of things, that's for darn sure. I bet Wall Street lost its collective mind, never mind the fact that they're still making more money than some entire countries.</p>

    • lvthunder

      Premium Member
      29 January, 2019 - 6:41 pm

      <blockquote><em><a href="#400472">In reply to Daekar:</a></em></blockquote><p>Actually it's the opposite. Apple shares are up in after hours trading.</p><p></p&gt;

      • AnOldAmigaUser

        Premium Member
        30 January, 2019 - 1:00 am

        <blockquote><em><a href="#400477">In reply to lvthunder:</a></em></blockquote><p>It will be interesting to see what happens in the light of day, after the analysts actually go over the numbers and guidance. It was OK given the revised guidance they gave, but it was hardly worth a 6% pop. My guess is that it gives most of that back tomorrow.</p>

  • Thomas Parkison

    29 January, 2019 - 6:25 pm

    <p>Who would have thought that making an iPhone that costs nearly $1000 would have been a bad idea? /sarcasm</p>

    • JoePaulson

      29 January, 2019 - 7:21 pm

      <blockquote><em><a href="#400473">In reply to trparky:</a></em></blockquote><p>Have you seen the price of the Galaxy S9? Though I think we are entering a period where it is more advantageous to be Android due to the fact that you have access to the entire app ecosystem.</p>

      • prjman

        29 January, 2019 - 8:18 pm

        <blockquote><a href="#400481"><em>In reply to JoePaulson:</em></a><em> There are plenty of options in the Android ecosystem that offer similar performance to an S9, with a much lower price tag. Android covers the gamut from super high end to incredibly affordable.</em></blockquote><p><br></p>

        • irfaanwahid

          30 January, 2019 - 4:27 am

          <blockquote><em><a href="#400489">In reply to prjman:</a></em></blockquote><p>I am all up for the new trend in the smartphones.. mid-range phones with decent specs. Eg, OnePlus, Xiaomi Y9/Pocophone.. I know we are giving up on some premium stuff.. but hell $1000 + are expensive. </p><p>Saying someone who owns iPhone X.</p>

        • cayo

          30 January, 2019 - 5:29 pm

          <blockquote><em><a href="#400489">In reply to prjman:</a></em></blockquote><p><br></p><p>But all those phones run Android, not iOS… It's not about hardware at all. </p>

      • andrey.opohmelkin

        30 January, 2019 - 1:36 am

        <blockquote><em><a href="#400481">In reply to JoePaulson:</a></em></blockquote><p><br></p><p>Have you seen how bad Galaxy S9 sales are? Samsung lost 30% in last quarter but who cares</p>

  • provision l-3

    29 January, 2019 - 6:38 pm

    <p>What is interesting, or what I find interesting, is that of Apple's remaining product segments Services had the smallest growth year over year. The Wearables, Home and Accessories (Formerly "Other") blew up with 33% growth and now is just a tad smaller than the Mac business and iPad is Apple's smallest business segment. I'm guessing this is largely driven by Apple Watch (Didn't Paul declare this a failure of a product?) and the increased pricing on iPad and MacBook Air didn't seem to stop people from buying those products.</p>

  • lvthunder

    Premium Member
    29 January, 2019 - 6:39 pm

    <p>Is there a reason why last years was so high? The X came out later then the XS and XS Max did this year. Also what were some of the numbers of the other makers. Did Samsung go down 10% compared to Apple's 15% or did they go down 2%.</p>

  • Bdsrev

    29 January, 2019 - 6:39 pm

    <p>Considering Apple is basically The iPhone Company, this is seriously bad news for them. Hopefully price cuts will bring sales back up</p>

  • remc86007

    29 January, 2019 - 7:14 pm

    <p>Apple could double their services revenue overnight if they made all of their services cross-platform. I have an iPhone, but I don't use any Apple services because nothing else I use is Apple. Heck, I'd pay monthly if they brought imessage to Windows. </p>

    • JoePaulson

      29 January, 2019 - 7:19 pm

      <blockquote><em><a href="#400478">In reply to remc86007:</a></em></blockquote><p>Right? Imagine the corporate investment if they worked with MS to create an SSO solution based on Active Directory.</p><p><br></p><p>Imagine a world where iMessage was available for PCs… (I can see them not allowing it on Android)</p><p><br></p><p>come on Apple….integrate better than Android with PCs and be rewarded.</p>

    • provision l-3

      29 January, 2019 - 10:00 pm

      <blockquote><em><a href="#400478">In reply to remc86007:</a></em></blockquote><p>Unfortunately Apple doesn't breakout its services by income but I think we can kind of spitball this one:</p><p><br></p><p>These are what I can think of:</p><p>Apple Music: Currently on iOS, Mac, Windows, Android and Alexa. </p><p>iTunes: Currently on iOS, Mac, Windows and some upcoming Samsung TVs</p><p>iCloud: Currently on iOS, Mac, Windows and via the Web. </p><p>Licensing (Airplay and whatever): by definition this is on multiple platforms.</p><p>Apple Pay: iOS, Mac. </p><p>App Stores: Mac and iOS</p><p>Maps: iOS, Mac and Duck Duck Go</p><p>AppleCare: Apple Products only</p><p><br></p><p>I'm sure I'm missing something there but those are the "services" I can think of that generate revenue. iMessage may but I'm not sure how. Looking at the list three are pretty well represented on multiple platforms. I guess Apple Pay could be expanded as well as Maps. The App Stores doesn't make much sense and AppleCare is an extended hardware warranty so that wouldn't make any sense. So, I am not convinced expanding the existing services that aren't on other platforms would actually gain much in the form of revenue. Am I missing something here?</p><p><br></p><p>Personally, I think making the Apple Watch work with Android phones would be an opportunity for growth given that the majority of phone are Android based. To me this would be similar to when they brought the iPod to Windows. But I have been known to be completely wrong on these things. </p>

    • robincapper

      29 January, 2019 - 10:36 pm

      <blockquote><em><a href="#400478">In reply to remc86007:</a></em></blockquote><p>The reason I suspect iMessage will not appear on Android (or elsewhere) any time soon is it's the lock-in mechanism for lots of iPhone users. They might lose more (revenue wise) than they'd gain</p>

      • irfaanwahid

        30 January, 2019 - 4:25 am

        <blockquote><em><a href="#400512">In reply to robincapper:</a></em></blockquote><p>And what's the incentive for Apple?</p><p>On iOS platforms it's another service to entice its current userbase. Taking it to other users Apple is not making any money.</p>

  • JoePaulson

    29 January, 2019 - 7:17 pm

    <p>Make cheaper iPhones with the current tech investment….The age of huge profits is over…You can make good profits though and take $300 off your top of the line…and at least 200 off the CR.</p>

    • BrianEricFord

      30 January, 2019 - 8:47 am

      <blockquote><em><a href="#400479">In reply to JoePaulson:</a></em></blockquote><p><br></p><p>If, as you say, there’s no innovation coming from Apple, there’s no innovation coming from anyone.</p><p><br></p><p>Apple’s chips alone are enough to show you’re wrong, though.</p>

      • MikeGalos

        30 January, 2019 - 11:13 am

        <blockquote><em><a href="#400571">In reply to BrianEricFord:</a></em></blockquote><p>Innovations that don't provide features to the user don't drive sales.</p><p>Innovations that only provide cheaper and more controllable manufacturing costs don't drive sales unless those savings are, at least in part, passed on to the user.</p><p><br></p><p>Producing your own chipset does not add features and any cost in manufacturing or licensing clearly hasn't been passed on to the users. And, no, including a different bundling of features into the chips than the OEMs you used to buy chips from is not innovation, it's just packaging.</p>

        • BrianEricFord

          30 January, 2019 - 12:50 pm

          <blockquote><em><a href="#400646">In reply to MikeGalos:</a></em></blockquote><p><br></p><p>Jesus — are your arms tired from carrying those goalposts, because they’ve moved quite a lot.</p><p><br></p><p>We’ve gone from a claim that Apple isn’t innovating (which seems to have disappeared, oddly) [edit to add it appears my original reply is attached to the wrong thread, for whatever reason] to “innovation doesn’t count if it does not add an obvious feature for consumers.”</p><p><br></p><p>That’s a ludicrous statement on its face before you even get to how crazy it is to say Apple’s custom chips provide no features that are meaningful to consumers.</p>

          • provision l-3

            30 January, 2019 - 3:15 pm

            <blockquote><em><a href="#400667">In reply to BrianEricFord:</a></em></blockquote><p>Right, above when responding he dismisses sales because marketshare, then down here it's innovation doesn't matter because it does't drive sales. Anything Apple related is like the Bat Signal for him to come out spouting loopy crap. Its gotta suck being mentally stuck in an insipid platform war that people loved to argue two decades ago. </p>

    • MikeGalos

      30 January, 2019 - 11:09 am

      <blockquote><em><a href="#400479">In reply to JoePaulson:</a></em></blockquote><p>That's never been Apple's business model, though. They count on huge profits and use their pricing as a differentiator for their product lines.</p>

  • Piyer

    29 January, 2019 - 7:59 pm

    <p>Apples current strength in iPhone design and sales will be its weakness in the long term.</p><p><br></p><p>They do not have strength in Data center and cloud operations like Microsoft, Amazon, Google and Facebook. Already lost the race to accomplish anything with Siri. The Social battle is also lost for Apple. The services component is directly tied to the iPhone users which will dwindle over a period of time. </p><p><br></p><p>Apart from exquisite hardware design with integrated software and supply chain credentials, Apple's track record of creating apps in other platforms is nothing to write home about. They do not have other inherent strengths for pivoting to additional channels of revenue, unless they buy companies. But integration and aligning with the Apple culture may take time.</p><p><br></p><p>Consumers are fickle, as Apple is seeing the signs now. Apple will continue to be a niche player, like when they used to be with the Mac Vs. PC days. Except singing to the choir, convincing a new generation of users to buy premium products is going to be difficult.</p><p><br></p><p>Ultimately the unthinkable may happen. To compete against Google, Amazon and Facebook, Apple may merge or join forces with Microsoft! Now, that would make a great Team!</p>

    • BrianEricFord

      29 January, 2019 - 9:21 pm

      <blockquote><em><a href="#400485">In reply to Piyer:</a></em></blockquote><p><br></p><p>This is a nonsense fever dream of a comment.</p>

    • provision l-3

      29 January, 2019 - 9:51 pm

      <blockquote><em><a href="#400485">In reply to Piyer:</a></em></blockquote><p><em>"Apple will continue to be a niche player"</em></p><p><br></p><p>Just to be clear, Apple had a "huge iPhone shortfall" in this quarter and made 84 billion dollars. For perspective, Amazon makes around 180 billion a year, Microsoft and Google make about 110 billion dollars a year and Facebook brings up rear at 40 billion. So Apple, the niche player, in a bad quarter made over double what Facebook does in an entire year, almost as much as what Google and Microsoft make in an entire year and over 40% of what Amazon makes in an entire year. If that is a niche player I'm curious who you think is a big player. </p>

      • Piyer

        30 January, 2019 - 5:08 am

        <blockquote><em><a href="#400510">In reply to provision l-3:</a></em></blockquote><p>Appreciate your point of view. Yes, Apple makes and keeps lots of money. That does not reflect its long term competitiveness. It is worth mentioning that even though Apple is the world's most profitable company, the credit rating for apple is AA+ and never achieved AAA rating. Maybe Moody's know something others do not.</p>

        • provision l-3

          30 January, 2019 - 6:36 am

          <blockquote><em><a href="#400554">In reply to Piyer:</a></em></blockquote><p>Wow, Moody's credit is just grasping at straws. But if you see that as an issue then you must really be concerned for Google, Amazon and Facebook (all companies you mentioned as being more competitive) because they all have a worse credit rating. </p>

        • rm

          30 January, 2019 - 8:21 am

          <blockquote><a href="#400554"><em>In reply to Piyer:</em></a><em>Basically Apple if iPhone implodes (it continues to lose market share year after year), that is all but about $22 billion in sales. If Surface were to implode (so far they continue to increase market share), Microsoft would only lose about $2 billion in sales. Being diverse pays huge benefits and because Apple is so depending on a product that is losing market share, it is a risking investment.</em></blockquote><p><br></p>

        • Greg Green

          30 January, 2019 - 8:44 am

          <blockquote><em><a href="#400554">In reply to Piyer:</a></em></blockquote><p>Apple is still profitable and has enough cash to keep warm for several winters. I doubt much innovation will come from current management, but there’s always hope for later.</p>

      • MikeGalos

        30 January, 2019 - 11:31 am

        <blockquote><em><a href="#400510">In reply to provision l-3:</a></em></blockquote><p>(All data from December 2018 NetMarketShare figures)</p><p><br></p><p>Vendor platform usage </p><p>Google – 38.9%</p><p>Microsoft – 37.9%</p><p>Apple – 21.3%</p><p><br></p><p>By Operating System</p><p>Android – 38.9%</p><p>Windows – 37.9%</p><p>iOS – 17.1%</p><p>macOS – 4.15%</p><p><br></p><p>Mobile (phone) share (51.8% of computing devices)</p><p>Android – 70.1%</p><p>iOS – 28.5%</p><p><br></p><p>Desktop/Laptop share (43.2% of computing devices)</p><p>Windows – 87.7%</p><p>macOS – 9.61%</p><p><br></p><p>Tablet share (4.9% of computing devices)</p><p>Android – 52.3%</p><p>iOS – 47.7%</p><p><br></p><p>Looks pretty niche when you actually look at numbers other than apparently unsustainable profit margins…</p><p><br></p>

        • provision l-3

          30 January, 2019 - 2:11 pm

          <blockquote><em><a href="#400649">In reply to MikeGalos:</a></em></blockquote><p>It's funny how Apple's success twist you into such knots. </p>

        • steenmachine

          30 January, 2019 - 3:51 pm

          <blockquote><em><a href="#400649">In reply to MikeGalos:</a></em></blockquote><p><br></p><p>Depending on what your definition of niche is, MacOS *might* be considered a niche desktop platform worldwide, although closer to 20% in US.</p><p><br></p><p>But to state iOS niche, given the total volume of phones, tablets, digital boxes, wearables, car systems, and future technologies, is pure drivel. </p>

    • pecosbob04

      30 January, 2019 - 6:15 am

      <blockquote><a href="#400485"><em>In reply to Piyer:</em></a><em> Doomed! Doomed I tell You!</em></blockquote><blockquote><br></blockquote><p><br></p>

  • martinusv2

    Premium Member
    29 January, 2019 - 8:00 pm

    <p>Maybe we will see more affordable phones this year? </p>

    • Darekmeridian

      30 January, 2019 - 11:09 am

      <blockquote><em><a href="#400486">In reply to MartinusV2:</a></em></blockquote><p><br></p><p>I don't think this will force prices down, but maybe this will be the ceiling for flagship phones.</p><p><br></p>

  • SvenJ

    29 January, 2019 - 8:17 pm

    <p>Seems they may have found the inflection point for price x volume. </p>

  • Awhispersecho

    Premium Member
    29 January, 2019 - 8:40 pm

    <p>So they raised prices by 20% and other hardware grew by 19% which means that essentially cancels out. But iPhone revenue still dropped by 15% even while raising the prices 20%, is that a 35% drop in unit sales for the iPhone? </p>

  • sentinel6671

    Premium Member
    29 January, 2019 - 9:08 pm

    <p>"Game over man, game over!</p><p>"We're in some pretty shit now man!"</p><p><br></p><p>#AliensFTW</p><p><br></p><p>:)</p>

  • Michael_Miller

    29 January, 2019 - 9:16 pm

    <p>So, a net margin of over 20% is outstanding any way you cut it. Cash flow of 27 billion is phenomenal.</p>

  • zybch

    30 January, 2019 - 12:05 am

    <p>I wonder how they define "active installed base of devices".</p><p>We know MS only counts devices active within the previous 28 days, but apple's claim of 1.4billion 'active' devices? I call bullpoop on that.</p>

    • steenmachine

      30 January, 2019 - 9:54 am

      <blockquote><em><a href="#400514">In reply to zybch:</a></em></blockquote><p><br></p><p>Considering Apple was close to eclipsing the 2 billion mark on total iOS devices sold back in September, I don't think the figure is far off. I know a few folk still using their iPad 2 (albeit slowly), and these were sold back in 2011.</p><p><br></p><p>But fair question…not sure how 'active' is defined.</p>

  • RobertJasiek

    30 January, 2019 - 12:16 am

    <p>The current decrement might be short-term or the start of a long-term development. </p><p>Short-term explanations: battery trade-in program, current political problems (USA trade restrictions, China's politics, growing Chinese competition, Brexit), available earlier mid-price models, no current SE successor in the low end of the mid-price range. </p><p>Long-term explanations: the prices have become too high, not everybody swallows the notch (e.g., I would never buy a phone rather than any with notch), not everybody prefers tall displays (e.g., I would never buy a phone rather than any with a ratio taller than 16:9), smartphones have become good enough for many so many think that they only need to be replaced when they do not do their job reasonably any more, low price Android devices have become sufficiently attractive for more people.</p>

    • pecosbob04

      30 January, 2019 - 6:13 am

      <blockquote><a href="#400517"><em>In reply to RobertJasiek:</em></a><em> So Bob how do you feel about the notch?</em></blockquote><blockquote><br></blockquote><blockquote><em><span class="ql-cursor"></span></em></blockquote><p><br></p>

      • RobertJasiek

        30 January, 2019 - 9:06 am

        <blockquote><em><a href="#400560">In reply to pecosbob04:</a></em></blockquote><p>Only about the restricted choice of smartphones I might buy. Less choice for me makes me a bit sad. Much more relevant is the total number 0 of currently avaliable smartphones I might buy in consideration of my exclusion criteria: too short security updates (no Android), no privacy violation (no Android), missing file management (no iOS), no notch, not taller than 16:9, no OS without prospect of long existence (What were WindowsPhone or Symbian?), no battery replacement service. Except for the price and a roughly tolerable design, this is almost all I expect from a smartphone but 0 remain although I have specified nothing about inner hardware. The broken display aka notch is just another nail in the coffin.</p>

        • steenmachine

          30 January, 2019 - 9:59 am

          <blockquote><em><a href="#400575">In reply to RobertJasiek:</a></em></blockquote><p><br></p><p>So you're rockin' two tin cans and a string?</p>

          • RobertJasiek

            30 January, 2019 - 10:53 am

            <blockquote><em><a href="#400598">In reply to SteenMachine:</a></em></blockquote><p>Email and cable phone (except that the new one is wireless within the house but connected to the cable entering the router).</p>

  • dontbe evil

    30 January, 2019 - 2:11 am

    <p>poor paul he tried to defend and push iPhones so hard</p>

    • pecosbob04

      30 January, 2019 - 6:11 am

      <blockquote><a href="#400522"><em>In reply to dontbe_evil:</em></a><em> What color is the sun on the planet you inhabit?</em></blockquote><p><br></p>

      • dontbe evil

        30 January, 2019 - 7:46 am

        <blockquote><em><a href="#400559">In reply to pecosbob04:</a></em></blockquote><p>there is no sun, there is a bitten apple, that's also the god of many people religion</p>

        • Greg Green

          30 January, 2019 - 8:40 am

          <blockquote><em><a href="#400566">In reply to dontbe_evil:</a></em></blockquote><p>You're like someone who hangs around furniture stores just to tell people you hate sofas. You should learn to live and let live. Life ‘s too short to be obsessed with things you don’t like.</p>

    • Stooks

      30 January, 2019 - 9:59 pm

      <blockquote><em><a href="#400522">In reply to dontbe_evil:</a></em></blockquote><p>Really??? He seems to been pushing Android pretty hard the last 3 years.</p>

      • dontbe evil

        01 February, 2019 - 12:00 am

        <blockquote><em><a href="#400757">In reply to Stooks:</a></em></blockquote><p>for some reasons he's having some kind of personal revenge against MS… he talks good about everything else than MS</p>

  • madthinus

    Premium Member
    30 January, 2019 - 3:30 am

    <p>I guess if you finally refresh products that has sit idle for years, surprise, people buy them again. To me the weakness of Apple is the little attention it pays to all it's other products. Recently watched that 1997 Macworld presentation of Steve taking about Apple straights as they are putting things in place to turn the company around. It is almost if they need to do this. Letting products sit for years is just terrible. They should be able to refresh Macbooks with the latest Intel chips without delay.</p>

    • wocowboy

      Premium Member
      30 January, 2019 - 6:22 am

      <blockquote><em><a href="#400523">In reply to madthinus:</a></em></blockquote><p>You have hit the nail on the head. The vast majority of the products Apple sells are 3-4 years old, some are 4-5 years old. Other manufacturers have continued updating their products on an annual basis over this time period, so their offerings are naturally far more up to date, tech-wise. On the other hand, people keep their Apple devices for many years in some cases. I just bought a new iMac because my 6 year old model was getting really long in the tooth and could not be upgraded to OS X Mojave. It had reached the "vintage" stage where updates stop. But, the iMac I replaced it with is a model introduced 3 years ago and not upgraded since then. I really did not want to buy a new computer yet but with no idea of when a new iMac with today's components inside will be coming, I pulled the trigger. The same scenario can be said of any number of other Apple products. All this said, none of these problems will make me switch to a Windows machine. With Microsoft's recent record on updates that bork one's machine, like just happened to Paul this week, I am just fine with Apple's spotless track record in this regard. And I will never purchase an Android phone that might never receive a single OS update over its lifespan. I value my personal security, identity, and privacy far too much to risk such stupidity.</p>

  • TechnologyTemperance

    30 January, 2019 - 10:46 am

    <p>US carriers (Thanks T-Mobile!) moving to financing phones, instead of 2-year contracts, have changed the game. With 2-year contracts, you always got the newest phone, because you paid the same amount anyways. It took a few years, but now that everyone knows exactly how much phones really cost (NOT $200), people are keeping their phones longer because they have a lower monthly bill.</p>

Windows Intelligence In Your Inbox

Sign up for our new free newsletter to get three time-saving tips each Friday

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Thurrott © 2023 Thurrott LLC