Apple Impresses With Earnings, Boosted By Record iPhone Sales And Booming Services

Apple reported first quarter fiscal 2017 earnings yesterday for the quarter ending December 31, 2017 that saw the Cupertino, CA based company post record quarterly revenue, boosted by record sales of Apple’s iPhones, the largest source of revenue for the company, combined with the best quarter ever for Apple’s services category which is gradually emerging as larger part of Apple’s business.

“We’re thrilled to report that our holiday quarter results generated Apple’s highest quarterly revenue ever, and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch” Apple’s CEO Tim Cook said yesterday after Apple’s earnings results.

For the quarter, Apple sold 78, 290 million iPhone units which generated $ 54, 378 billion, ending 3 consecutive quarters of declines, and helped in part because it was a full quarter that Apple had to sell their iPhone, unlike the previous quarter.

Apple gained 5 percent year over year sales growth with the iPhone for the quarter, beating the 3 percent estimate from FactSet.

CEO Cook said the iPhone 7 was the best-selling smartphone in China during the quarter, according to Quantar.

Apple’s service category, which includes Apple Music, App Store, iTunes, and iCloud continues to soar.

“It was our best quarter ever for services, with almost 7.2 billion dollars in revenue. App Store customers broke all-time records during the holiday quarter, including 3 billion dollars in purchases in December alone, making it the App Store’s single best month ever” Cook reported during the conference call.

“Services are becoming a larger part of our business, and we expect the revenues to be the size of a Fortune 100 company this year. Our services offerings are now driving over 150 million paid customer subscriptions; this includes our own services and third-party content that we offer on our stores” Cook said.

Apple CFO Luca Maestri echoed the bullish sentiment about Apple’s services.

“On the Music front, we are the market leader in digital music, and obviously now by having the combination of the download business with the streaming service — which we didn’t have until recently — we’ve been able to bring our music business back to growth” Apple CFO Luca Maestri said.

“We’ve grown over the last three quarters, and we feel very good about that. Tim has talked about original content, we’ve had very good success with exclusives, so we know it’s another business that we can grow” Maestri added.

CEO Cook said the goal Apple hopes to accomplish is to double the size of their services business over the next four years and “put our toe in the water with doing some original content for Apple Music” which will be rolling out through the year.

Revenue from Apple’s music business grew for the third quarter in a row while other products such as AppleCare and iCloud storage services reached all-time record highs.

Revenues were also strong with Apple’s Mac.

“Mac not only returned to growth, but generated its highest quarterly revenue ever” CEO Cook said.

For the quarter, Apple achieved a record quarter with total revenue of $78.4 billion, combined with an all-time record quarterly earnings per diluted share of $3.36, easily beating the Factset estimate of $ 3.22, and surpassing $ 3.28 in the year ago same quarter.

CEO Cook noted during the conference call that he is optimistic of the prospect for tax reform in 2017 along with a repatriation that could help to unlock Apple’s large cash reserves.

“I am optimistic, given what I’m hearing, that there would likely be some sort of tax reform this year, and it does seem like there are people in both parties that would favor a repatriation as a part of that, so I think that’s very good for the country and good for Apple. What we would do with it, let’s wait and see exactly what it is. But, as I’ve said before, we are always looking at acquisitions; we acquired 15-20 companies per year for the last four years, and we look for companies of all sizes” CEO Cook said during the conference call.

Cook explained it’s more about the strategic value of an acquisition and Apple isn’t limited by the size of the company.

Written By:

Johnathan Schweitzer


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