Apple, Inc. Earns $19.97B Profit In Its Second Largest Quarter Ever

NEWS: 02.04.19- In an earnings call last Tuesday, on January 29, Apple, Inc. reported its financial results for fiscal Q1 2019 and reported that it earned a profit of $19.97 billion out of a revenue of $84.3 billion during the holiday Q4 2018 which made it, according to Macworld magazine, the second largest quarter ever for the Cupertino, California-based tech company.

However, the report was a mixture of good and not so good news as Macworld magazine former lead editor Jason Snell wrote in a takeaway of the earnings results.

In the call, which lasted about an hour, were Apple CEO Tim Cook and Apple CFO Luca Maestri who discussed — with a group of Wall Street financial analysts — the company’s latest financial results.

After the earnings call, Wall Street Journal (WSJ) staff reporter Tripp Mickle wrote that the underwhelming report on Tuesday extended another tumultuous period under Cook. Mickle reported that the month began when the chief executive slashed the company’s revenue forecast for the first time in more than 15 years sparking investor fears about growth.

The Apple CEO previously reported right after the new year that the company would be revising its outlook for its fiscal Q1 2019. In a letter to Apple investors on January 2, Cook explained that revenue would be lower than expected.

An excerpt from letter is as follows:

When we discussed our Q1 guidance with you about 60 days ago, we knew the first quarter would be impacted by both macroeconomic and Apple-specific factors. Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter. …

That was close to a month before Cook an Maestri would share the company’s financial results. How did Apple fare in the end?

Cook, in that same letter, wrote that he expected Apple to exit the quarter with approximately $130 billion and the tech company was right on target as Maestri confirmed that figure in a press release published on apple.com just hours in advance of the earnings call last Tuesday.

“We generated very strong operating cash flow of $26.7 billion during the December quarter and set an all-time EPS record of $4.18,” said the Apple CFO. “We returned over $13 billion to our investors during the quarter through dividends and share repurchases. Our net cash balance was $130 billion at the end of the quarter and we continue to target a net cash neutral position over time.”

The company’s posted quarterly revenue of $84.3 billion suffered a decline of 5% from the previous year’s quarter while in contrast its quarterly EPS, or earnings per diluted share, of $4.18 was up by 7.5%. (International sales made up 62% of the quarterly revenue).

Apple provided the following earnings statistics of its products and services — which combined grew by 19% — in the press release on January 29:

• Mac revenue grew by 9%
• iPhone revenue declined 15%
• iPad revenue grew by 17%
• Wearables grew by 33%
• Accessories grew by 33%
• Services revenue was up 19%

According to Wired magazine contributor Molly Wood, in an opinion piece unrelated to finances, per se, published three days after the Apple earnings call — where she discussed the disruption of the tech company due to a lack of innovation from its walls in recent years due to complacency — the iPHone accounted for $51 billion of the $84.3 billion revenue .

Sales of the iPhone, which accounted for two thirds of total revenue, fell from $61.1 billion a year earlier according to the wSJ’s Mickle.

Wood reported that the services segment of the company was, in her own words, the brightest non-iPhone spot in its earnings lately and according to her own estimates, a third or more of the revenue from those services — such as Apple Music, iTunes, and iCloud — was driven by the 30% cut it takes from apps downloaded from the App Store.

Despite that fact, in Mickle’s report, he wrote that growth of the company’s services business slowed during the period, stoking investor concern. He also added that the segment increased revenue to $10.88 billion, a deceleration from six quarters of more than 20% growth.

“The company is on track to hit its goal of $50 billion in total services revenue by 2020,” said Maestri, the Apple CFO. “We think the business will continue to grow nicely going forward.”

All of the growth, however, according to Wired magazine’s Wood, came from the wearables and accessories category — the former of the two translated into sales of the Apple Watch — and was the other bright spot in the company’s earnings.

In other numbers, Mickle of the WSJ reported that, according to Apple, total active devices increased 8% last year to 1.4 billion — a deceleration from the more than 15% compounded annual growth rate between 2015 and 2018 — and the company disclosed for the first time that the iPHone accounted for 900 million of its active devices which increased by 75 million last year.

The staff reporter wrote that amid the turmoil, Cook projected confidence on the earnings call.

“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,” said the Apple CEO. “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.”

A webcast of the earnings call in audio-only format — which Apple stated on January 29 would bee available for approximately two weeks thereafter (following the live stream) — can be listened to on the company’s website at: www.apple.com/investors/earnings-call/

Note from the Author: a full version of the Wall Street Journal article linked in this story (which can only be read on its website with a paid subscription to the newspaper) was republished on LinkedIn which was included in its “Daily Rundown” of news for its members which is where this writer procured the information cited in this story.