Apple services shine as hardware sales remain flat in its Q1 2018

Apple announced its first-quarter 2018 financial results today. The company took in $61.1 billion in revenue, up 16% from a year ago, and it earned $15.9 billion in operating income on that revenue, up 13% from a year ago. Net income totaled $13.8 billion, up 25% from a year ago. Gross margin was 38.3%, down 0.6 percentage points from this time a year ago.

  Q1 2018 Q1 2017 Change
Revenue $61.1 billion $52.9 billion up 16%
Operating income $15.9 billion $14.1 billion up 13%
Net income $13.8 billion $11 billion up 25%
Gross margin 38.3% 38.9% down 0.6 percentage points

iPhone sales continue to make up the bulk of Apple hardware earnings. The company moved 52.2 million handsets last quarter, up 3% from this time a year ago. CEO Tim Cook says "customers chose iPhone X more than any other iPhone each week in the March quarter," and that choosiness may have contributed to a 14% year-on-year revenue increase to $38 billion for the segment.

Apple moved 9.1 million iPads in the quarter, up 2% from a year ago, and those slates brought in $4.1 billion to the company's coffers, up 6% from a year ago. Four million Macs found their way into buyers' hands, a 3% decrease from a year ago, while Mac revenue was flat at $5.8 billion. Continuing disappointment with the delicate keyboards on MacBooks and MacBook Pros may be contributing to buyer skittishness with the company's traditional personal-computing devices.

As hardware sales remain flat, Apple's services division continues to grow rapidly. The company's various services brought in $9.2 billion in revenue, up 31% from a year ago. Should that pace of growth continue, the services business could make as much revenue as Macs and iPads combined as soon as next quarter.  Finally, the "Other Products" category, which includes hardware like the Apple Watch, enjoyed brisk growth with $3.9 billion in revenue, up 38% on the year.

Thanks to friendlier US tax regulations that went into effect recently, Apple says it will authorize a new $100 billion share repurchase and a 16% increase in its quarterly dividend. That means shareholders of the company's common stock as of May 14 will receive $0.73 per share on May 17.

For the next quarter, Apple expects revenue between $51.5 and $53.5 billion and a gross margin between 38% and 38.5%.


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