Apple Inc. (AAPL) Earnings Beat Estimates, Stock Falls On iPhone Numbers

Apple Inc. (AAPL) released its Q1 F2018 earnings results after closing bell tonight. Apple Inc. (AAPL) earnings amounted to $3.89 per share on $88.3 billion in sales. Analysts had been expecting $3.85 per share in earnings on $87.5 billion in sales. In Q1 F2017, Apple Inc. (AAPL) earnings per share amounted to $3.85 on $78.4 billion in revenue.

Apple Inc. (AAPL) Earnings Beat Estimates AAPL
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Apple Inc. (AAPL) earnings driven by strong sales growth

Americas revenue rose to $35.2 billion, while Europe revenue increased to $18.5 billion. Greater China revenue rose to $18 billion, while Japan revenue increased to $5.8 billion. Sales in the Rest of the Asia Pacific region grew to $6.9 billion.

Apple Inc. (AAPL) sold 77.3 million iPhone units for $61.6 billion in revenue, while the Street had been expecting 80 million units. In the same quarter a year ago, the company shipped 78 million iPhones. The company shipped 13.17 million iPads for $5.9 billion in revenue and 5.1 million Macs for $6.9 billion in sales. Services revenue rose to $8.5 billion in Q1 F2018 from $7.2 billion in the year-ago quarter. The company also announced that its active installed base of devices hit 1.3 billion in January.

iPhone X dominates the Apple Inc. (AAPL) narrative

The big story lately has been expected disappointments in iPhone unit numbers as more and more analysts pick up data points suggesting that the iPhone X did not sell as well as they initially expected it to. Apple Inc. (AAPL)didn’t launch the ultra-pricey model until early November, and even then, it was in short supply for about the first month.

By the end of December, it looked like the supply problems had eased as there were plenty of units available, but the debate over how many iPhone X units were sold during the all-important holiday quarter continued. Tonight’s Apple Inc. (AAPL) earnings release finally brings clues, not only in the total number of iPhone units but also the average selling price. Obviously, a higher ASP points to a more positive mix of pricey models verses the less expensive iPhone models.

Apple Inc. (AAPL) provides guidance

For Q2 F2018, Apple Inc. (AAPL) management expects sales to be between $60 billion and $62 billion. They expect the gross margin to be between 38% and 38.5% and the tax rate to be about 15%.

Analysts will now be picking apart the Apple Inc. (AAPL) earnings guidance for the March quarter for clues about iPhone average selling price and unit numbers. Any signs that management expects a higher ASP for the quarter would be another signal of positive iPhone mix.

Analysts were also hoping the Apple Inc. (AAPL) earnings release would include more information about the company’s capital return plans. Many are hoping some of the repatriated cash will be used for share repurchases and dividend increases, although the company avoided talking about capital return when it announced its plans to “contribute” to the U.S. economy in the form of jobs and investments this year.

Apple Inc. (AAPL) stock slumped by more than 1% to as low as $165.01 in after-hours trades.