Apple has officially announced its December quarter results. The tech giant exceeded Wall Street expectations in terms of revenues and profits, but many investors were unhappy with the iPhone sales. The holiday quarter sales were not indicative of the so-called “super-cycle.” Analysts were expecting the iPhone X to trigger a super-cycle of massive upgrades. That didn’t happen. However, Apple CEO Tim Cook told investors during the earnings call that the iPhone X sales “surpassed our expectations.”
iPhone X was the top-selling iPhone in every week since launch
The iPhone X, iPhone 8, and 8 Plus were the top three smartphones during the October-December quarter. The iPhone X launched on November 3rd, mid-way through the holiday quarter. It still managed to emerge the best selling iPhone despite rumors of weaker than expected sales. The new iPhones brought in the highest ever revenue of any iPhone lineup ever.
Apple CEO Tim Cook said the iPhone X was the “top selling iPhone” every week since its launch on November 3. The tech giant shipped 77.4 million iPhones during the quarter, which is lower than 78.2 million units sold in the corresponding quarter a year prior. Even though Apple shipped fewer iPhones in the latest quarter, the iPhone X’s higher price helped Apple record a 13% YoY jump in revenues.
Cook added that the iPhone X supply was “constrained for a while,” but Apple and its suppliers “did a great job” reaching the supply-demand balance in December. Revenues from iPhones rose in all regions including mainland China. “It was a stellar quarter for iPhone,” said Apple CEO Tim Cook. The tech giant doesn’t break down the iPhone sales by model, but the iPhone’s average selling price of $796 suggests that the iPhone X indeed had a stellar quarter. The iPhone ASP was $695 in the same quarter a year ago.
iPhone X customer satisfaction off the charts, says Apple CEO Tim Cook
Interacting with investors, Apple CEO Tim Cook said the iPhone X customer satisfaction was “off the charts” and that the Face ID technology was “incredibly well received.” While many analysts and tech reviewers have criticized the notch on the iPhone X, consumers seem to have embraced it. Apple was “thrilled” with the way the iPhone X was received.
The technology heavyweight reported $88.3 billion in revenue and $20 billion in quarterly profits. The iPhone lineup generated $61.6 billion in revenues. The services segment saw its revenues go up by 18% to $8.5 billion. The other products category that includes the Apple TV and Apple Watch registered a 36% jump in revenues to $5.5 billion. Apple CEO Tim Cook added that the total number of active Apple devices has gone up to an all-time high of 1.3 billion. It speaks volumes about Apple’s customer loyalty.
Apple also issued guidance for the current quarter. It expects revenues between $60 billion and $62 billion, well below Wall Street projections of close to $65 billion. Apple ended the December quarter with $285 billion in cash and cash equivalents, much of which is stashed overseas. Apple said last month that it would take advantage of the Trump’s new tax rate to bring back much of its overseas cash, which would result in a $38 billion tax bill.
iPhone X was a risky bet that paid off for Apple
Despite record revenues in December quarter, analysts are concerned whether Apple can continue growing as the smartphone market matures. The iPhones account for more than 50% of its revenue, and the iPhone sales declined in the latest quarter (77.4 million versus 78.2 million in Oct-Dec 2016) despite the launch of the iPhone X. The revenue growth was because of the anniversary model’s high price, not because Apple sold more iPhones.
The recent revelations that Apple was slowing down older iPhones as batteries degraded has also hurt the tech giant’s image. GlobalData managing director Neil Saunders said the decline in iPhone sales was “worrying.” It indicates that Apple wasn’t coming with innovations that could “wow” consumers. If Apple wants to maintain its dominance in the smartphone market, it has to “pull something new and unique out of its hat” soon, said Saunders.
Multiple analysts and supply chain reports have claimed that Apple was cutting the iPhone X production in the current quarter due to weaker than expected demand. Citing supply chain sources, the Nikkei Asia Review reports that the tech giant had halved the iPhone X orders for the January-March quarter from 40 million to 20 million units. The Wall Street Journal has also learned from its sources that Apple had dramatically reduced the iPhone X production “in the face of weak demand.”
Irrespective of whatever analysts say, the iPhone X was a risky bet that has paid off for Apple. Few companies would have attempted to launch a premium smartphone with a notch and a four-figure price tag and expected consumers to stand in queue for the device. Only Apple could have done it. Consumers have praised the Face ID, Animoji, and the intuitive user interface that works like a charm once you get used to it.