Apple announced its Q4 earnings results for 2019 yesterday, top-lined by revenues of $64 billion, slightly higher than last year’s quarter: Services revenue grew sharply, while earnings from both iPhones and Macs fell somewhat below last year’s levels. In other words, Apple’s strategy to de-emphasize hardware sales and bet more on subscription services seems to be working.
Back in July, Apple told analysts to expect Q4 revenues to be in the $61 to $64 billion range, with a gross margin between 37.5% and 38.5%. Ahead of the announcement, analysts expected sales of $63 billion, up only slightly from actual sales of $62.9 billion in Q4 2018, and $2.83 in estimated earnings per share, down from $2.91 one year ago.
That $64 billion in revenue is up 2% year over year compared to Q4 2018, with quarterly earnings per diluted share of $3.03, up 4% from Q4 2018, though net income was down to $13.686 billion from $14.125 billion.
Apple’s biggest moneymaker, iPhone sales, still continued to decline compared to last year, bringing in $33.36 billion in revenue compared to $36.76 billion last year, a drop of roughly 9.2%. On the flip side, Apple reported that it had reached a record high for its services business, which brought in$12.5 billion in Q4 (compared to $11.46 billion last quarter, and $10.6 billion year over year).
Mac revenue was also down nearly 5% to $6.99 billion, although iPads ($4.65 billion in revenue) and Apple’s wearables/home/accessories unit ($6.52 billion in revenue) both saw sizable jumps compared to last year.
Here’s a better look at the key numbers and how they compare against analysts’ expectations and the company’s performance the same quarter one year ago.
- Q4 revenue: $64 billion. Analysts were looking for $63 billion. In the same period a year ago, the company posted revenue of $62.9 billion.
- Q4 earnings per share: $3.03. Wall Street was expecting $2.84. In its fourth-quarter last year, Apple earned $2.91 a share.
- Q1 revenue (guidance): $85.5 billion to $89.5 billion. Analysts were expecting $86.51 billion. Apple saw sales of $84.3 billion in the first quarter of 2019.
- Q1 earnings per share: Apple didn’t provide a per-share earnings forecast, but the guidance it did provide implies it expects a first-quarter per-share profit of between $4.15 a share and $4.63 a share, assuming its share count remains about the same. The midpoint of that range is $4.39 a share, which is slightly below analysts’ estimates of $4.42 a share.
Apple says that it now has over 450 million paid subscriptions across the services on its platform, compared to over 330 million just a year ago.
“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad.
With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”
Tim Cook, Apple’s CEO,
Apple’s Q4 earnings for 2019 include early contributions from the iPhone 11 and iPhone 11 Pro, released in September, as well as the Apple Watch Series 5 and substantially discounted Series 3.
While AAPL earnings no longer include hardware unit sales, the company does provide this revenue breakdown by product category:
- $33.36 billion: iPhone
- $12.5 billion: Services
- $6.99 billion: Mac
- $6.52 billion: Wearables, Home, and Accessories
- $4.66 billion: iPad
Apple is expected to refresh some of its laptops in the coming months and plans to imminently launch the pricy Mac Pro. Aimed at creative professionals, the Mac Pro’s price point makes it less of a mass-market device than the MacBook Air.
In recent months, Apple has also launched multiple subscription services, including Apple News+, Apple Card, and Apple Arcade, with Apple TV+ arriving tomorrow, perhaps its biggest bet yet on selling consumer subscriptions (although the number does include Apple’s new Arcade games service, which also launched back in September).
All eyes will be on Apple’s next quarter, traditionally its strongest by far, as it tends to include the bulk of its holiday sales, as well as the fact that it’ll be the first to include the upcoming TV Plus service. Last year, the company generated $84.3 billion in revenue in its first fiscal quarter for 2019, and the company seems to expect that its new products are going to be popular. It is forecasting revenue for Q1 2020 between $85.5 billion and $89.5 billion, compared what it made in Q1 2019.
If it manages to come in at the top end, it would likely be the company’s strongest single quarter to date. Also, if that comes to pass, it’ll be interesting to see how much of that revenue will come from new iPhone sales or other products.
Notably, many of Apple’s services, are driven by the iPhone and as such, the iPhone remains an important part of Apple’s business. As reported by Bloomberg earlier on Wednesday, the company expects the iPhone to return to growth in 2020 following the launch of four new iPhones, including three models that support 5G and one cheaper variant. Analysts also believe the introduction of 5G will be drive upgrades following next year’s expected iPhone launch.
