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%.

 

Comments closed
    • HERETIC
    • 2 years ago

    It’s not rocket science-apple knows every way possible to rip you off-
    [url<]https://www.fudzilla.com/news/mobile/46196-apple-stinging-customers-on-battery-repairs[/url<]

    • Alexko
    • 2 years ago

    I’m surprised by the strength of iPad sales. I thought tablet sales were generally declining, as people tend to replace the ones they already own very infrequently.

    Did I miss something?

      • chuckula
      • 2 years ago

      iPads used to be Apple’s #2 product over Macs by a [url=https://techreport.com/news/25972/record-iphone-ipad-sales-bolster-apple-q1-financial-results<]wide margin[/url<]. Now the reverse is true even though Apple goes out of its way to be incompetent with the Mac and to push the iPad almost as hard as the iPhone. So it's all relative.

      • tipoo
      • 2 years ago

      329 iPad turned that around.

        • kvndoom
        • 2 years ago

        Indeed! First time it went on sale for $279 I bought without hesitation. It was a great purchase (got a keyboard case too) and sees lots of use.

    • End User
    • 2 years ago

    It does not take a rocket scientist to figure out why Mac sales declined:

    [url<]https://buyersguide.macrumors.com/#Mac[/url<]

      • chuckula
      • 2 years ago

      Apple clearly Osbourned itself when we all know the Apple 2020 Miracle ARM chip will destroy all of these machines while simultaneously being your iPhone.

      • derFunkenstein
      • 2 years ago

      Thing is, you just never know when the next model is coming. Yes, Apple’s entire lineup is more stale than the bag of popcorn you left open overnight. But if you need a new Mac, you need a new Mac, and Apple is fully aware. I’m honestly surprised they haven’t taken a similar approach to iPad updates.

        • sweatshopking
        • 2 years ago

        I’d also suggest that the bulk of apple users, grandparents, don’t know or check when new models are coming out.

          • chuckula
          • 2 years ago

          I think I have hard evidence [url=https://www.youtube.com/watch?v=p6eyWc8vxnY<]that you're right[/url<]

            • derFunkenstein
            • 2 years ago

            Nice

          • End User
          • 2 years ago

          Hipsters, not grandparents. Get you facts straight.

            • Ushio01
            • 2 years ago

            They where hipsters when the iPod was first released today they are grandparents.

          • derFunkenstein
          • 2 years ago

          I don’t even know how to do that. I bought a MBP in January. So far the investment has been fine.

        • End User
        • 2 years ago

        iPad Pro is as stale as SSK’s wit.

      • blastdoor
      • 2 years ago

      Definitely. They could also add some missing pieces to the lineup, like the long dreamed of headless mid-level desktop.

    • tipoo
    • 2 years ago

    If I had to choose between the mac and the iPhone disappearing tomorrow, I’d chose the iPhone, it’s nice but there’s plenty of nice phones, while the mac is a more unique platform. And still I’d argue has more of a ‘niceness’ lead than the iPhone does over flagships.

    It’s why I hope the flatness of mac sales isn’t why investment in it by appearances seems to be lagging, I hope we look back on this as a slow period they just get over. If someone were a pure logistics guy who was made CEO without strong emotive connections to the products, I know where I’d invest, but it’s short sighted as you can’t create the apps that draw people to iPhones and iPads on them themselves. The ecosystem matters and should be invested in heavily.

    Maybe this is all just an awkward period as they’re working really hard internally on as seamless as possible an ARM switch. I wonder how high up they go, the 12″ Macbook is a shoe in for it, but do they build a fully custom chip for something relatively more niche like the iMac Pro? Do they fab dedicated GPUs too with their custom GPU now?

      • chuckula
      • 2 years ago

      They are one you see, the iPhone and the [s<]dark lord[/s<] [u<]2020 Mac[/u<].

      • tay
      • 2 years ago

      Oh hell no…. I can go to Linux or Windows. I can’t imagine using Android.

        • tipoo
        • 2 years ago

        Agree to disagree. Having a unix like terminal alongside a very well supported OS (not saying it doesn’t have warts and user wishes) with software support from most companies nowadays is a bigger deal to me, and the trackpad gestures are mimicked but not yet met or surpassed even in Windows Precision and they just make the OS a joy to use.

        If someone is happy in Linux more power to them, but despite what’s said year over year software titles and support just aren’t the same as macOS.

        I like my iPhone, but if a phone ran well and had decent battery life I’d be pretty content. My computer is where work gets done, my phone is a quick use web browser and messenger. So I know which one I’d give up first.

    • chuckula
    • 2 years ago

    It’s so bad that Intel even broke the keyboards on the Macbooks?

    Let’s bring that 2020 ARM chip forward to 2019 and get hardware rolling again Apple!

    • derFunkenstein
    • 2 years ago

    For whatever reason I’m just surprised that the iPhone X is the most popular iPhone. The internet tells me that nobody wants to pay $1000 for a phone. Hell, I don’t want to pay $1000 for a phone. So why is it selling so well?

    edit:
    [quote<]Four billion Macs found their way into buyers' hands[/quote<] HOLY $#!T

      • tay
      • 2 years ago

      I know several people that bought an iPhone X. It was just a few hundred more and they only replace once every three years unless someone wants a handmedown or something. The X is quite a bit nicer than the 8.

        • Klogg
        • 2 years ago

        It’s really this I think. You know roughly what year you are going to be replacing your phone if that is a thing you are into, the phone is the most used device in your life, given that and a decent income and suddenly it isn’t hard to decide you will spend more to get something nicer.

        Why does anyone buy a BMW when a Ford does the speed limit? I bought a Ryzen rig because Ryzen came out and that was exciting, not because my 3770 was struggling. No one here second guesses that, heck yeah new computer! My phone gets way more of my time than the computer that I only see in the evenings.

      • Srsly_Bro
      • 2 years ago

      What derFunk? Not you, too. You stooped to using “hell.” You’re better than that!

        • chuckula
        • 2 years ago

        Don’t even get me started about the X-rated iPhone.

          • trackerben
          • 2 years ago

          The rumored iPhone SE X? Size matters.

            • kvndoom
            • 2 years ago

            You’re holding it wrong.

        • derFunkenstein
        • 2 years ago

        Hecks yeh.

        • End User
        • 2 years ago

        What the hell is wrong with that?

          • derFunkenstein
          • 2 years ago

          What Srsly_Bro doesn’t get is that it’s not the word, it’s the intended meaning. I could have said “hey” and meant the same thing.

            • Srsly_Bro
            • 2 years ago

            What really grinds my gears is the context. It’s lazy speech like over using idioms in speech. Many resort to idioms because their vocabulary is limited. Saying “heck, rant following” or “hell, rant soon after.” Comes across as lazy hill person speak, and by that I mean someone with limited education and vocabulary. That’s why I said you’re better than that.

            Look around on comments and you’ll see the hell, and heck, used, and immediately after is an incoherent rant typically written by a simple person. It’s quite common in comments.

            You’re better than that, is my point.

            • derFunkenstein
            • 2 years ago

            I shall endeavor to Do Better.

            • End User
            • 2 years ago

            Hell ya!

      • kvndoom
      • 2 years ago

      The mantra of “more money than sense” I suppose.

      That plus the ubiquitous monthly payment sales model. I guess people just see the cell phone bill as a 2nd car payment.

      Ugh, I struggle with paying $300 or more for a phone. I will pay good money for “long term” tech, like audio equipment that will last decades, but all this ephemeral crap being peddled nowadays just isn’t worth it.

        • moose17145
        • 2 years ago

        I feel the same way as you. I will spend decent money on longer term tech… or even my desktop (I mean it is kind of one of my hobbies, after all), but I just cannot bring myself to spend anywhere near that much money on a phone that I am just going to be forced to throw out as soon as the battery stops taking a charge anymore.

          • derFunkenstein
          • 2 years ago

          The good news is that if you’re really mechanically inclined they’re still kind of replaceable, and even if you’re not, the cost of replacement is far less than a new phone. For instance, I took my iPhone 6S Plus to a local shop to have them replace the battery. $60 well spent, because it’s entirely serviceable.

          It had been sitting in a drawer for around 6-7 months with a basically-fully charge (my mistake) and the battery health in iOS 11.3 said 89%. It was fine for a couple weeks but then it deteriorated quickly. When the battery health said 70%, I had the battery replaced. The 6S family still gets iOS updates (and will for another year or two yet), so there’s basically no reason to buy a new phone.

          • blastdoor
          • 2 years ago

          FIY, it costs $79 to replace the battery in the iPhone X (right now it costs $29, but once that special is over, it will be $79). So you’re really not forced to throw it out because of the battery. And while you might say $79 is expensive, it’s a heck of a lot cheaper than buying a new $1,000 phone 😉

          Of course, that doesn’t help regarding other forms of wear and tear. Smartphones live a dangerous life. They can be dropped, lost, sat on, etc. So I can definitely understand not wanting to spend a lot on something that is naturally going to be at risk of a lot of damage.

            • kvndoom
            • 2 years ago

            I think a lot of expensive tech we buy long term is mostly stationary too, so the risk of breaking is also why it’s hard to stomach the price for mobile devices. My $600 TV isn’t going anywhere unless it’s the victim of an earthquake or a drive-by. And I won’t replace it until either it fails or I really find I can’t live without 4K any longer. The latter won’t be any time soon.

            Boggles my mind how averse a lot of folks are to cases and screen protectors. A mint condition 2-year old iphone is worth probably 60-70% of its new value. But I seem to see far more broken ones than good ones whenever I peruse used phones. Many owners treat their phones like they’re throwaway goods, regardless of how much it cost.

    • blastdoor
    • 2 years ago

    I continue to diversify out of their stock in the interests of a more balanced asset allocation, but by golly it’s been a good ride.

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