Gears & Gadgets

While iPhone sales remain stagnant, Apple services hit $10 billion in revenue

One of several styled Apple logos associated with the October 30 event.
Enlarge / One of several styled Apple logos associated with the October 30 event.

Apple announced on its earnings call today that it had surpassed its revenue estimates for Q4 2018. The iPhone maker boasted $ 62.9 billion in revenue, slightly more than the $ 60-62 billion it previously estimated, as well as $ 14.1 billion in profit, up from $ 11.5 billion in the previous quarter.

“We’re thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our two 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 statement.

Apple sold 46.8 million iPhones, 9.6 million iPads, and 5.2 million Macs in the final quarter of 2018. While that represents a 14 percent increase in iPhone sales when compared to last quarter, it’s about the same number of iPhones sold this time last year. However, year-over-year revenue from iPhone sales was up by 29 percent, thanks to the increase in iPhone prices.

This quarter saw the reveal of the iPhone XS and XS Max, but only a fraction of those sales contribute to these numbers because of the handsets’ late release date. The YoY increase mostly comes from the $ 1,000 iPhone X, which has been the best-selling iPhone since its launch in September 2017. The X continues to sell well enough that Apple moved roughly the same number of iPhones and made nearly 30 percent more. Now, the average sale price for an iPhone is $ 793, up drastically from $ 618 in the same quarter last year.

Apple’s services business, a constant bright spot in recent quarters, hit a revenue milestone in Q4 2018: $ 10 billion (it’s $ 9.98 billion to be exact, but Apple rounded up). That’s an increase of 27 percent from Q4 2017, in which services including iCloud, Apple Music, the App Store, and others brought in $ 7.9 billion in revenue.

When asked about how Apple plans to continue growing its services business, CFO Luca Maestri highlighted the “exponential trajectory” of all of Apple’s services from Apple Music to the Apple Store to Apple Pay. Maestri also called out Apple’s “very large and growing” install base, which is currently at an all-time high. With so many users within the Apple ecosystem, the company now has the opportunity to monetize more services, improve existing services, and add new ones like Apple’s Search Ad business on the App Store. Maestri said that the company is on track to double its fiscal 2016 services revenue by 2020.

iPad numbers were lackluster: unit sales were down 16 percent from last quarter, and revenue was down 14 percent as well. That might be due to all the rumors leading up to this week’s “special event” in which Apple released the new iPad Pros. Those devices feature all-new designs, a new Apple Pencil, and higher prices to boot. Meanwhile, Mac sales brought in 39 percent more revenue than last quarter, thanks in part to sales of the updated MacBook Pros and the back-to-school season overall.

Apple’s “other products” category, which includes the Apple Watch, AirPods, Apple TV, HomePod, and others, saw a 13 percent sequential increase and a 31 percent increase from this time last year. Cook praised the wearables segment (Apple Watch, AirPods, and Beats devices) numerous times on today’s call, although Apple still doesn’t provide individual product sales numbers for the devices included in that category.

Cook said the company saw an “overwhelmingly positive” response to the Apple Watch Series 4, which debuted in September alongside the iPhone XS and XS Max. When asked about Apple’s future in the health care space, Cook said that health is an “area of major interest” for Apple as the company looks to add more health products and services into its business.

Both Apple and investors are looking forward to the first quarter of 2019, which will include holiday sales and more data about iPhone XS, XS Max, and XR sales. Apple set its sights high: it estimates Q1 2019 revenue to be between $ 89 and $ 93 billion.

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Tech – Ars Technica