Apple Posts Big Declines Compared to Year-Ago Quarter

Posted on April 30, 2019 by Paul Thurrott in Apple, Apple Watch, Cloud, iOS, Mac and macOS, Mobile, Smart Home with 40 Comments

Apple announced today that it has posted net income of $11.6 billion on revenues of $58 billion for the quarter ending March 31. Both are major declines compared to the year-ago quarter.

“Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record,” Apple CEO Tim Cook allegedly said in a rather complex prepared statement. “We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services.”

Left unmentioned there, of course, is the iPhone, Apple’s primary driver of both profits and revenues. In fact, Apple’s press release about its quarterly earnings doesn’t even mention the iPhone once beyond a boilerplate description of the company.

Apple does, however, mention the iPhone in a condensed statement of operations. There we can see that iPhone was responsible for over $31 billion, or about 53 percent of Apple’s total quarterly revenues. That’s a drop of 17.6 percent compared to the $37.6 billion in revenues that iPhone generated in the same quarter a year ago.

Mac revenues dropped as well: Mac was responsible for $5.5 billion in revenues, compared to $5.8 billion a year ago.

But iPad, Wearables, and Services both saw gains in the most recent quarter. Apple’s iPad business accounted for $4.9 billion in revenues, up from $4 billion a year earlier. Wearables hit $5.1 billion in revenues, up from $3.9 billion a year ago. And Service surged 14 percent to $11.5 billion in revenues, up from $9.9 billion a year ago.

Apple is pinning its future on Services, as you may have heard, and that business is now responsible for 20 percent of Apple’s revenues. Apple said it now has 390 million subscribers across its own and third-party services on its devices. It has a goal to hit 500 million subscribers by 2020.

As for the future, Apple did discuss the iPhone in a call with Reuters.

“As we look at the iPhone results through [the previous quarter], the results were stronger on a year-on-year basis for the last few weeks of the quarter,” Mr. Cook said. “We also saw a similar result in China. These, along with the continued success with wearables and so forth, give us some confidence that things are getting a bit better.”

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Comments (40)

40 responses to “Apple Posts Big Declines Compared to Year-Ago Quarter”

  1. Avatar

    pecosbob04

    Doomed,doomed I tell you! AAPL down 1.93% at the close, up 4.92% currently. That is an almost 7 % swing, the street must have found something to like. Don’t these investors read Paul’s stuff?


  2. Avatar

    dcdevito

    I predict Apple is going to make a huge push into health and keep the wearables devices going. Their wearables business hit $5.1B in the last quarter. That’s impressive.

    The iPad is also resurgent, with revenue up 22% from the December quarter to $4.9 billion. That’s the highest revenue growth the iPad segment has seen in six years.

  3. Avatar

    techguy33

    +5% After Hours. Guess the market didn't get Paul's memo

  4. Avatar

    RobertJasiek

    iPhone revenue drops because iPhones are too expensive. iPad revenue increases because reasonably priced iPads are also available. The impact of repair service rip-off contributes to limiting an increment in the user base but does not drive users of still working iOS devices away from Apple in masses.

    I use an iPad as a temporary emergency device because a comparable Windows tablet (small display ratio, outdoor-usable display, sufficient battery duration, handholdable) still does not exist. However, I would think 10 times as much about the danger of repair service rip-off as about hardware / OS of a new iPad / battery. For me, Apple used to be a Walled Garden company - now it has also become a Rip-off company. The iPhone ASP does not affect me because I do not need any iPhone but the repair service politics are as relevant to me as the iPhone prices are relevant to most.

    Apple tries to become a services company so why not always offer the best repair services? Greed drives iPhone ASP and repair service rip-off. For how long can Apple milk its core customer base until it runs away in masses?

  5. Avatar

    Tony Barrett

    These 'prepared statements' are just that - they're not even written by Cook! They'll always gloss over the bad things, and spin everything else, as they're mainly designed to appease the market and shareholders. The bottom line, yes, Apple still make a sh*tload of cash, but the iPhone is now on the slide. Apple's year on year price increases almost certainly contributed to that - pushing their 'customers' to see how much they're actually prepared to spend. Apple's draconian control policies could also be contributing to that. I personally know a few people who've switched to Android, and yes, they said it was initially painful, but now they wouldn't go back - its like a breath of fresh air!

    I've already read comments on Apple's statement on other sites, and they see it from a different perspective - it's all just a personal viewpoint. Ultimately, Apple stock rose 4% on the news. Go figure!

  6. Avatar

    rmlounsbury

    As always Apple needs to find new revenue streams and can't continue to be a mostly 1 trick pony. The next year should be interesting to see if Apple can make a hard pivot like Microsoft has done.

  7. Avatar

    wocowboy

    "Left unmentioned" in Paul's article is the fact that these declines in revenues, etc turned out to be less than what analysts were expecting, and that Apple gave some guidance that the upcoming quarter might provide better numbers, which are significant pieces of information that no doubt contributed to Apple's stock rise following the earnings report, also unreported by Paul. Also, it is not news that Apple did not mention iPhone sales in this report, as they accounced several months ago that they would no longer report sales numbers for the iPhone, as well as other individual products. This is not some big "new" conspiracy from Apple as Paul's wording insinuates. The phrase "rather complex prepared statement" is also an unnecessarily conspiracy-toned use of wording. I expect better than this from Paul.

    • Avatar

      dcdevito

      In reply to wocowboy:

      Exactly. Paul is being a bit of a sensationalist here, but it’s okay.

    • Avatar

      Rcandelori

      In reply to wocowboy:

      You missed Paul's point altogether - he was referring to the fact that Cook didn't mention iPhone revenue at all in the press release which is surprising given that over half the company's revenue is derived from that business. The sales numbers are irrelevant. It is clear Apple is doing everything it can to distract people from the precipitous decline in iPhone revenues because if they weren't they'd be screaming from the rooftops about another blockbuster quarter for iPhone.

      • Avatar

        wocowboy

        In reply to Rcandelori:

        All companies use their numbers to obscure and avoid things they do not want to highlight or bring focus to. That's nothing unusual at all. The markets obviously did not react in a negative way to the quarterly report, because as others have pointed out, Apple beat expectations and gave positive guidance for the upcoming quarter, things that did not happen for Google, unfortunately. Yes, sales of iPhones were down, as were sales of cellphones from every other maker, it's a downward trend in the industry that will make a turn for the positive at some future date when there is a significant enough technological breakthrough that makes people want to upgrade their phones on a more short-term basis. There is no need for an "Apple is doomed" or "Google is doomed", etc scenario at all.

  8. Avatar

    rejohnson

    Revenues and income have many factors affecting them that have nothing to do with product sales themselves. For example, currency exchange can kill your revenues even though you're selling more than ever. You're just not getting as many US$ for your products. Or you can raise prices and get more revenue for the same or even less total sales. The more important value will always be the total number of customers so one can tell how well demand is going and adjust expenses accordingly to increase one's bottom line. It does appear that Apple is selling less iPhones and that should be a concern for them. However, the only way they will sell more is to lower their prices which could still have little or even negative impact to those revenue numbers for the near term. They've simply overpriced the iPhone and opened more opportunities for less expensive competitors. Once people move away they often stay away so Apple is going to experience slower and inconsistent growth until they deliver a phone that more people can afford year after year. It's called "arithmetic"!

  9. Avatar

    lvthunder

    So Apple hit a trillion dollar evaluation again today. So I guess the market wasn't scared of these numbers.


  10. Avatar

    gvvbvbuguwgd

    Very interesting post.this is my first time visit here. I found so many interesting stuff in your blog especially its discussion..thanks for the post!


  11. Avatar

    Vladimir Carli

    if the numbers that are circulating are true, they show a 30% decrease in iphone shipments. That's pretty bad for apple...


    https://www.idc.com/getdoc.jsp?containerId=prUS45042319

  12. Avatar

    obarthelemy

    My issue with Apple's services strategy is that nobody ever bought an iService who didn't have an iDevice. If iDevice sales keep declining, iService sales can't make up for that over the long run. You've got to have an iDevice for that iService to run on.

  13. Avatar

    lvthunder

    "Apple CEO Tim Cook allegedly said in a rather complex prepared statement"


    He ether said it or he didn't. It shouldn't of been too hard to determine if that's what he said or not.

    • Avatar

      Jackwagon

      In reply to lvthunder:

      I can buy that the statement is not from Tim's mouth (or keyboard, or pen) directly, but I'd have to imagine that he at least gave final approval of the statement before it went out. Even if the statement wasn't his exact words, I would find it difficult to assume that it doesn't line up with his thoughts in some way.

  14. Avatar

    provision l-3

    Paul's going for the big clickbaits.


    So actual numbers since Paul seems selective in what he posts:

    Revenue was down 5%


    Revenue By Region

    Americas: +3%

    Europe: -6%

    Greater China: -22%

    Japan: +1%

    Rest of Asia Pacific: -9%


    By Product Type:

    iPhone: -17%

    Servies: +14%

    Mac: -4%

    Wearables and Accessories: +30%

    iPad: +22%


    So these "big declines" were iPhone revenue, Greater China and Rest of Asia Pacific.


    The rest of the product line seems to be doing fairly well from a growth standpoint. Particularly wearables (I wonder if Paul still stands by his "The Apple Watch is a failure" comments)


    Stuff that was interesting in the overall quarterly announcement:

    • Gross margins were separated by hardware and services for the first time. 31.2% and 63.8% respectively.
    • Wearables and Accessories is bigger than iPad and almost as large as the Mac business by revenue.
    • Some folks (Paul), correctly, tie services to the iPhone/iOS but incorrectly tie it to unite sales rather than active user base. If those folks were correct we would see the unit sales and services revenue trend together and they aren't. So, as long as the user base grows then services still has room to go irrespective yoy declines in unit sales.
    • Next quarter's guidance looks to be flat yoy which would indicate Apple sees a light at the end of the tunnel for the "big declines".






    • Avatar

      jedwards87

      In reply to provision l-3:

      Exactly. This site is getting harder and harder to keep coming back. Pauls obvious dislike/bias towards Apple is getting really old. But thats journalism today. Click bait with no real substance.

    • Avatar

      Truffles

      In reply to provision l-3:

      Thanks for this analysis - it's much more illuminating than the article itself.

    • Avatar

      Stooks

      In reply to provision l-3:

      We get it, you really like Apple.


      The problem for Apple is that the iPhone makes up at least 50% of their revenue/profit and has their highest profit margin and it took the biggest hit.


      It it is great that services and iPad went up but they are what percent of their overall revenue?


      Apple is not going anywhere but with overall smartphone saturation across the market one could say Apple may have peaked. Their future will be all about their ability to pivot and move on. Right now I am on the fence about that prospect. Their recent announcements around the news, gaming sub and the vapor TV service is not inspiring confidence. When Gizmodo writes an Article telling people not to forget to cancel the Apple news service after 30 days,, it is not a good vibe.

      • Avatar

        provision l-3

        In reply to Stooks:

        All I posted were facts and skipped editorial other than pointing out the “big declines” was hyperbole on the part of Paul. If you see that facts as being pro-Apple then your issue is with reality and not me.


        Speaking of facts, you are correct that iPhone is Apple’s largest source of revenue but it doesn’t have the largest margins. The margins for services are over double. Kind of weird that you just made that up.


        I agree that Apple has hit the peak for where it can go on iPhone alone and to continue to grow revenue they will have to not just have to make up for the decline in iPhone revenue but exceed that amount. That is t happening in the near future.


        I’ll also be transparent here. I own AAPL shares and I have no intention of selling them as they stock is a long term investment. Clearly I’m more optimistic on Apple’s ability to pivot in the long run. Of the companies often covered on Thurrott I also own MSFT and GOOG. My ownership is not based on warm fuzzy feelings about anyone’s products but based on their financials. I’m sure I own other companies via mutual funds as well.

        • Avatar

          Stooks

          In reply to provision l-3:

          You are correct, the information I had about profit margins was on hardware and is from early 2018, which stated the iPhone, especially the higher end models had the highest profit margin of all Apple hardware up to 64%, probably over services in the past as well. So no I did NOT make anything up.


          Your post history is Apple leaning/bias/apologetic, this is just another example. Trust me Paul pretty much HATES Apple and will take every opportunity to spin them negatively. I come here for Microsoft news as I suspect most do. The little I actually care about Apple I will go elsewhere for that kind of information.


          I do not own any shares from those companies. If I did, I would probably only go with MSFT because I think they are much better diversified and their core customer base (Enterprise) do not change their mind on a whim.


          It will be interesting to see where Apple goes post smartphone. I personally think they should have had mouse support for the iPad years ago. I own a iPad Pro, 12.whatever with the Apple Keyboard no less, and would be an excellent small and light laptop replacement I could take with me on vacation if I could use a BT mouse with it. Without external pointing device support its a consumption device 99% of the time for me because is simply not precise enough to replace my laptops. I believe with mouse support the iPad sales would see a big boost and corporate sales would increase in a huge way.


          Their services are growing because they are new (ish) and have lots of devices to run on. That said compared to Amazon and Microsoft their services pale in comparison and I doubt Apple will ever get back into the business side of computing outside of making iOS devices compatible and that will limit their services business. I used to manage Xservers and their RAID storage products a long time ago.

          • Avatar

            provision l-3

            In reply to Stooks:

            I'm going use bullets points to be concise:


            • Profit Margins: Okay, I know what you are referencing. People were comparing the BOM of the iPhone to the selling price and calling that the profit margin. Assuming the BOM is correct that still isn't the full cost of getting the phone to market. It is one one part of cost. Fun fact, since 2012 iPhone sales have shot up astronomically but Apple's profit margins have declined. It was was at 45% then. Mathematically it doesn't really work out for iPhone revenue to more than doubled and not have a positive impact on margins if it is the highest margin product Apple has/had.


            • My Apple Bias: Debating this probably a waste of time. If you are saying my post here is an example of it then make that argument. So far you have failed to point to anything in my initial post that was incorrect, inaccurate or was in indication of bias. Your argument is "because i say so". Say so all you want. As for other posts, feel free to comment on them and I'll be happy to extrapolate on why I think the way I do. Or say bias, whatever makes you happy.


            • Paul doesn't hate Apple. Paul's revenue is dependent on subscribers and ad revenue. For better or worse hyperbolic language about Apple draws eyes. So, while I hear what you are saying about while be here for MS news (a common refrain) the reality is Paul needs to make money and MS news alone isn't gonna cut it.


            • MSFT is a good investment, totally agree.


            • I'm not entirely sure how the tangent on mouse support for the iPad fits into anything in my original post. I guess because you see it as an opportunity to grow iPad sales. Possibly.


            • I think comparing Apple's services revenue to Microsoft and Amazon is as goofy as comparing Microsoft and Amazon's hardware revenue to Apple's. The three have different business models. Even if you do compare the services it is difficult comparison as their respective "services" are different.


            • Totally agree that business computing is not on the horizon.


            • RIP Xserve and Xserve Raid. I hope you never had to deal with XSAN, Jesus what a piece of shit that was.


            So much for being concise.

  15. Avatar

    dontbe evil

    oh no your beloved apple has a big decline ... guys run to buy some overpriced iDevices to help your beloved company

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