Apple beat on the top and bottom lines as sales of iPhone sales grew for the first time in a year.
But the pick-up in the company’s business – which lifted Apple shares 2% in after-hours trading on Tuesday – may not prove as robust as some had hoped.
Apple’s sales forecast for the first three months of 2017 fell short of Wall Street targets.
Apple’s revenue, however, returned to growth after three quarters in which its revenue fell on an annual basis. Apple’s revenue was helped by record sales of its most important product, the iPhone. Apple said that this quarter’s earnings, at $3.36 per share, set a company record.
But while iPhone and Mac sales were strong, Apple reported its 12th consecutive quarter of annual iPad sales declines. However, Cook said that Apple Watch sales set records for revenue and units sold, but did not disclose exact figures.
Apple declared a cash dividend of $0.57 per share Tuesday.
Here are Apple’s key earnings figures versus Wall Street’s expectations:
Q1 EPS (GAAP): $3.36, up 2% year-over-year, versus expectations of $3.22
Q1 revenue: $78.4 billion, up 3% year-over-year, versus expectations of $77.4 billion
Gross margin: 38.5%, versus expectations of 38.4%
iPhone unit sales: 78 million, up 4% year-over-year, versus expectations of 76.3 million
iPhone ASP: $694, versus expectations of $688
iPad unit sales: 13 million, versus 16.12 million in the year-ago quarter
Mac unit sales: 5.3 million, versus 5.3 million in the year-ago quarter
Q2 revenue guidance: between $51.5 billion and $53.5 billion
Here are the important numbers from Apple:
Earnings call live blog:
5:56: And we’re done here. Thanks for tuning in!
5:54: Cook: “Beyond the 90-day clock I’m very bullish on iPad.”
5:53: Talking iPad. Tim Cook says it’s good that Apple reduced iPad channel inventory. “”All in all, there was quite a few things going on there,” Cook said.
5:51: “Qualcomm withheld a billion dollars in payments they owed us, we felt like we had no choice, in terms of where it goes, we’ll see. I don’t like litigation so if there’s another way that would be great, but at this point I don’t see it,” Cook said.
5:50: Tim Cook: “I don’t like litigation. You should take from our filing that we didn’t see another way forward. They were insisting on charging royalties for technologies that they had nothing to do with. So the more we innovated, the more money Qualcomm would collect for no reason and the more expensive it would be for us to innovate. It’s somewhat like buying a sofa and charging someone a different price based on the house it’s going into.”
5:49: Qualcomm question!
5:47: “Clearly the issue of the strong dollar doesn’t help us,” says Luca Maestri. Says strong dollar chills international demand. Some prices have been raised by 40% in local currency terms.
5:43: Tim Cook dodges. Says he doesn’t have the answer in front of him.
5:43: Return to growth in China?
5:42: “The way we look at this is, in a quarter where you have a supply constraint, it’s difficult to draw too many conclusions from it,” Cook said.
5:41: “We didn’t predict demand for iPhone 7 Plus very well,” says Tim Cook. Says demand was much higher than expected. “Switcher” number from Android higher than Apple had seen in other quarters.
5:40: What’s up with India? Tim Cook: “We had all-time record revenue results” in India. “In the longer term, I feel really good about how we’re doing there. We are in discussions on a number of things, including retail stores, and fully intend to invest significantly in the country, and believe it’s a great place to be.”
5:40: Luca says that GM was at the high end of expectations.
5:39: Question about gross margin. Apple analysts seem to have lots of margin anxiety.
5:37: “We account for some of these services in some of these ways, and that drives different margin percentages” on the services business, Maestri says. More info on Apple’s services business here.
5:31: Cook fields this question. “It’s a significantly better performance any way you looked at it, versus what we had experienced the previous three quarters. iPhone 7 was the best-selling smartphone in China according to Kantar.” Mentions that Hong Kong is a difficult market. “We’re not without challenges there although I do like many things I’ve seen.”
5:30: Question about China and trends on the ground.
5:29: Luca Maestri: ARPU per customer increasing by double digits.
5:28: RBC analyst asks about how much is services growth increased monetization vs growth of installed base.
5:27: Cook on the cable TV bundle: “We’ve come a long way in a year and it gives us a platform to build off of….We are learning a lot about the original content business and thinking about ways we could play it.”
5:24: Tim Cook: “I am optimistic on what I’m hearing for some tax reform this year, it seems there are people in both parties that would favor repatriation as part of that. That would be good for the country and good for Apple. What we would do with it, let’s wait and see what it is. We are always looking at acquisitions, we acquired 15-20 companies per year for the last four years. We look for companies of all sizes. Not a size we would not do, based on the size of it. More about the strategic value of that. In terms of strategic content, we’ve put our toe in the water with Apple Music, rolling out through the year, we’re learning from that, and we’ll go from there.”
5:23: On to the questions. Morgan Stanley’s Katy Huberty asks about gross margin guidance. Maestri says 100 basis point spread is not unusual. Huberty then asks about potential larger M&A and overseas tax repatriation.
5:22: Apple’s guidance includes over $1 billion of foreign exchange headwinds factored in.
5:22: Apple reduced its share count by 65 million over the quarter, Maestri says.
5:21: $230.2 billion of Apple’s cash is held overseas.
5:21: Maestri: Retail stores saw “double digit growth” in visitors and revenue.
5:19: Recent data from NPD says Apple dominates tablets over $200 in the United States.
5:18: Luca on iPad says it was “ahead of expectations” with growth in China and India. Still way down for the quarter.
5:16: Luca turns to services. “App Store growth was up 43% for the first three 13 weeks of the quarter.”
5:15: iPhone average selling price is up, driven by “amazing success of iPhone 7 Plus.”
5:14: “Strong customer interest left us in supply/demand imbalance for several products this quarter,” Maestri says.
5:12: Now we’re hearing from CFO Luca Maestri.
5:12: I bet it feels good for Tim Cook to say “record-breaking quarter” again.
5:11: Tim Cook talking about the enterprise business with IBM and SAP.
5:09: “I’m personally using HomeKit in my own home,” Tim Cook says. Siri turns his lights on in the morning, he says.
5:08: “We now have a rich lineup of wearable products” with Apple Watch, AirPods, and wireless beats. “Huge potential for Apple Watch going forward.”
5:07: Best quarter ever for Apple Watch in both unit sales and revenue.
5:06: Goal is to double the size of Apple’s services this year.
5:05: Tim Cook says that this quarter was the “best quarter ever for services.”
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