Apple Reports Q3 2019 Results: $10B Profit on $53.8B Revenue, Highest June Quarter Revenue Ever

[spinedoc77]

The shift to services is going well. I wonder...as the focus strays from hardware to services. If services will suffer if hardware sales dwindle? Just thinking out loud so to speak. Does the hardware drive the services sales?

I'd think that Apple has reached some kind of critical mass with the amount of hardware users they have. Even if they don't upgrade they will still use their services, which is the beauty of that strategy. Now Apple just has to pile on the subs, I'm sure they will add television soon and who knows maybe leasing an Apple automated vehicle one day. Plus I'm sure they will still sell hardware as more innovations come out. Don't forget we are on the cusp of foldable screens, but that's just one example, the industry has to keep reinventing itself in order to survive. Next year we get 5g, which to me is useless, but it's getting a ton of hype.

 

[falainber]

So adorable! People have been leading with those words for years!

Maybe write a letter to Mr. Cook and give him a heads-up?

Why would I care? I am not a AAPL share holder. Also, company capitalization includes two major components: assets (cash) and the value of the business. Apple's capitalization is the same as it was a year ago but its cash reserves have increased which means that the value of its business has declined.

 

[ROGmaster]

Apple had a very good quarter. Simply accepting that fact isn't making excuses. However, trying desperately to frame this quarter as bad is the very definition of "making excuses".

They had a mediocre quarter at best.

You can't even take responsibility for your actions, you were making excuses, that's why you brought another company into this discussion.

I never directed this comment at you, so why are you acting like I was specifically talking about you? Must have hit close to home, I guess.

Yeah sure sure, using your style I will say this: it doesn't matter, what I said still stands.

What's interesting about comparing Big Macs to Filet Mignon? Why compare sales of phones starting at $39 (Android) to premium phones (iPhone)?

Oh right, because "Apple is killing it" doesn't get nearly as many hits for sites as "Apple is doomed" does. So analysts will keep "lying" to get that traffic and make up these stupid charts that offer nothing of value to anyone.

Such a bad anecdote. That's the best you've got.
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And good for you as well. Looks like this is good for all concerned. Apple posted $52B last quarter, and Samsung took a bath...but because it’s diversified they will be okay. They had better start selling those dishwashers.

From what they say they will start selling more of those expensive OLED displays they make. Apple should prepare their money, 2020 won't be a cheap year for them.

 

[realtuner]

They had a mediocre quarter at best.

They had their highest ever revenues (albeit by a small margin) of any Q2 in their history. 4 out of 5 of their product lines saw increases, some of them substantial. Everyone knew the iPhone would be down slightly, so there wasn't any surprise there. That's why their stock price is up after hours. Their guidance for the next quarter indicates they will again beat their previous record for Q4. That is hardly mediocre.

You can't even take responsibility for your actions, you were making excuses, that's why you brought another company into this discussion.

The had a great quarter, so there's no excuses that need to be made (as I already previously stated).

Samsung is absolutely relevant to this discussion. They released their earnings on the same day as Apple. They are a major competitor to Apple. They are constantly compared to Apple in articles about smartphones or earnings calls. It only makes sense to compare them. Especially when people are trying to claim Apple had a bad quarter and Samsung is "alright" when their profits tanked. Two quarters in a row.

Such a bad anecdote. That's the best you've got.

When the majority of Android phones sold around the world are under $100 (and many starting at $39 like the ones I see at 7-11) it's a perfect example. I suppose you also like to compare Ford sales to BMW or Mercedes and claim BMW/Mercedes are failing because they sell fewer vehicles.

 

[I7guy]

They had a mediocre quarter at best...

Apple had a good quarter and stock is up.

 

[ZeitGeist]

You see Apple pivoting away from iPhone to other growth businesses, beautifully.

Amazing job.

Yes, Amazing job massaging those number... which is all they did.

iPhone sales are declining, and that decline is driven by the idiotic X series iPhones, the removal of TouchID and Home Button, which alienated and drove away sufficient customers from upgrading to premium and flagship models, at a rate of 20% a year (and now in its second year). These chickens have now come home to roost.

Services revenue, which was touted, is tied to iPhone sales - so, not a good ‘pivot’.

They can use a bunch of current numbers to distract from the obvious 800 lb gorilla in the room, but they are running out of time. Since the X fiasco, they have had 2-3 years before repercussions become unavoidable (ie once they start losing longtime users to the other side), so its no coincidence that all these leaks point to a better iPhone product-line in 2021.

With apologies to those that like the X iPhones, but that product line has been an unmitigated disaster for Apple - and I’m glad there are hopes for corrections and improvements in 2021.

 

[ZeitGeist]

Trying hard to find the doom.

Take off the rose-tinted glasses.

 

[spinedoc77]

Yes, Amazing job massaging those number... which is all they did.

iPhone sales are declining, and that decline is driven by the idiotic X series iPhones, the removal of TouchID and Home Button, which alienated and drove away sufficient customers from upgrading to premium and flagship models, at a rate of 20% a year (and now in its second year). These chickens have now come home to roost.

Services revenue, which was touted, is tied to iPhone sales - so, not a good ‘pivot’.

They can use a bunch of current numbers to distract from the obvious 800 lb gorilla in the room, but they are running out of time. Since the X fiasco, they have had 2-3 years before repercussions become unavoidable (ie once they start losing longtime users to the other side), so its no coincidence that all these leaks point to a better iPhone product-line in 2021.

With apologies to those that like the X iPhones, but that product line has been an unmitigated disaster for Apple - and I’m glad there are hopes for corrections and improvements in 2021.

I'll bet (but only guessing as I have no research) that Apple loses iphone customers to itself, meaning users don't necessarily switch to Android, they just hang onto their iphones for longer. I'd be curious to see what market research says, I'm sure someone will post up some links. My guess is that declining iphone sales are more based on lack of new "wow" features on new phones. At least in the states it seems price isn't necessarily an issue with financing as most don't bat an eye at paying $20-30/month, it's just another monthly cost of living life. Personally I just hand in my phone every year and get a new one, same as handing in my car every 3 years. I also LOVE that they got rid of the home button and made the usable screen larger. I wouldn't mind having an inscreen touch ID, but at the same time continue to be impressed with Face ID, having both would be best IMO.

I also think the X is by far the best looking and most functional iphone up to the time it was released. But even if consumers don't want $1000 phones, Apple still has a lot of options that are cheaper from the XR, to older models, to refurbished phones and such. Even buying an iphone used still is a win for Apple as that's one more consumer tied to its ecosystem and another source of service revenue.

Services revenue isn't necessarily tied to iphone sales as much of the service revenue comes from existing users who aren't upgrading their iphones. A user upgrading his iphone to another iphone doesn't mean an increase in their service revenue for that consumer, unless the new iphone has a hardware feature required for that particular service. Not to mention users who own other hardware such as ipads, laptops, Apple TV, Apple speaker, headphones, etc. Apple has the existing hardware numbers to really leverage services, now they just have to keep coming up with reasons for consumers to pay for them. But seeing as how society in general has massively shifted to perpetually paying a monthly fee for virtually everything now I don't see this being an issue.

 

[neuropsychguy]

I'm guessing services business has lower margins than products business?

https://www.apple.com/newsroom/pdfs/Q3 FY19 Consolidated Financial Statements.pdf

For the 3 months ended June 30, 2018, Apple sold $43,095 million of products vs the $42,354 million for the 3 months ended June 29, 2019

For the 3 months ended June 30, 2018, Apple sold $10,170 million of services vs the $11,455 million for the 3 months ended June 29, 2019

Apple has gross margins of >60% on services and <38% on hardware/products. Sources in my comment on a different thread: https://forums.macrumors.com/thread...-high-of-11-46-billion.2191851/#post-27586517

 

[spinedoc77]

"Meanwhile, Apple also still sells the iPhone 7 for $299." I think that blurb from the article is key, Apple still has options for those that don't want to spend $1000. Heck my wife refuses to upgrade her ip7 because she feels the newer phones are too large. That's the beauty of the services approach, if it works.

 

[Baymowe335]

Yes, Amazing job massaging those number... which is all they did.

iPhone sales are declining, and that decline is driven by the idiotic X series iPhones, the removal of TouchID and Home Button, which alienated and drove away sufficient customers from upgrading to premium and flagship models, at a rate of 20% a year (and now in its second year). These chickens have now come home to roost.

Services revenue, which was touted, is tied to iPhone sales - so, not a good ‘pivot’.

They can use a bunch of current numbers to distract from the obvious 800 lb gorilla in the room, but they are running out of time. Since the X fiasco, they have had 2-3 years before repercussions become unavoidable (ie once they start losing longtime users to the other side), so its no coincidence that all these leaks point to a better iPhone product-line in 2021.

With apologies to those that like the X iPhones, but that product line has been an unmitigated disaster for Apple - and I’m glad there are hopes for corrections and improvements in 2021.

The X pushed iPhone to $166B in revenue in 2018, almost 20% better than the second best year. It was ridiculously successful. Calling the iPhone X a “fiasco” is a fundamental misunderstanding of the reality and is flat out wrong. The X is what makes subsequent comparable years so hard. It did so well it’s hard to compare against. Again, $166B in iPhone revenue during the iPhone X launch year.

The reality is, there are almost 1B active iPhones and the quarterly unit number can’t grow forever. The overall active iPhone user base is growing, however.

You’re also mistaken on services being tied to iPhone unit sales. We just saw a record services revenue despite again falling iPhone revenue. This shows services continue to produce while iPhone new sales decline. This is because engagement and active devices have never been higher.

Apple again set records for active iPhones, iPads and Macs.

My suggestion is to either try to understand the data better or refrain from commenting. You are flat out wrong in your analysis. It’s not what the data says.

 

[BootsWalking]

"Meanwhile, Apple also still sells the iPhone 7 for $299." I think that blurb from the article is key, Apple still has options for those that don't want to spend $1000. Heck my wife refuses to upgrade her ip7 because she feels the newer phones are too large. That's the beauty of the services approach, if it works.

Agree about options being good, and I'm still rocking an iPhone 7 myself which I'm extremely fond of. But with those options come downsides for Apple, specifically negative revenue growth for iPhones, and more importantly, lower gross margins as well. Time will tell how well services will make up the difference.

 

[Pootie Tang]

A year ago today a share of Apple stock sold for $190. At this moment a share costs $217. In addition: Apple just added more than $40 billion to its market capitalization and surged past the ONE TRILLION dollar mark based on strong earnings for the quarter.
https://markets.businessinsider.com...t-cap-40-billion-1-trillion-2019-7-1028402612

 

[rgbrock1]

Trying hard to find the doom.

Don't worry, there are plenty of 'the sky is falling' posters here who will pick up the doom and gloom flag soon enough.
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It's crazy how something as unimportant as "Wearables + Accessories" or "Services" each make as much revenue as the Mac. You can get many of these services fro free from Google, and you can definitely live without iCloud or Apple Music, while the Mac is something that can earn you a living if that's what you do.

I do hope Apple's strategy for the Mac stops being "just double the price every 6 months" because that isn't going to work forever.

Yes, Google's services are "free" in that they don't cost the consumer any money directly. However, Google's services know more about you than you might care to think about.

 

[eoblaed]

Don't worry, there are plenty of 'the sky is falling' posters here who will pick up the doom and gloom flag soon enough.

Surely, after a report like that, you must be wrong.

Take off the rose-tinted glasses.

Oh, guess rbgrock1 wasn't wrong.

It doesn't take rose-tinted glasses. There was a sizable declination in iPhone sales (all of which was predicted based on a whole host of factors, including international sales challenges, etc), and yet Apple still posted the biggest Q3 revenue, ever.

If Apple doesn't break a record, people cry doom.
If Apple does break a record, people claim Apple relies on a single product for all their profits, and still cry doom.
And, apparently, if Apple breaks a record and does it despite that single product dropping in sales and other products/services rising, people still cry doom.

One begins to think that there are just some people that will cry doom no matter what.

 

[spinedoc77]

Agree about options being good, and I'm still rocking an iPhone 7 myself which I'm extremely fond of. But with those options come downsides for Apple, specifically negative revenue growth for iPhones, and more importantly, lower gross margins as well. Time will tell how well services will make up the difference.

Definitely agree, but it's not as if no one knew this would happen. Even years ago everyone was talking about this, thus Apple's pivot more towards services. But we also don't know what future hardware will bring and if that will spark hardware sales again. Look at how Apple came out and dominated overnight with the iphone and the ipad. Cook may not have the design pedigree of Jobs, but then again he will be fine if he simply copies other innovators. Who knows what the next must have will be, maybe foldable screens, maybe true optical zoom, maybe DSLR quality pictures, maybe more privacy scandals for Android/Google, who knows. Plus the increase in pricing balance out the decrease in upgrades to a small degree.

But at this point it's all just pure speculation, although very interesting conversation. My take is that services will do just fine based on how prevalent and really common place subscriptions for pretty much everything have become, but there will be a small bubble to burst in Apple's valuation. $1000 sounds like a heck of a lot of money to most consumers, but $30/month sounds like a lot less.

 

[spinedoc77]

Yes, Google's services are "free" in that they don't cost the consumer any money directly. However, Google's services know more about you than you might care to think about.

I think that many just stick their head in the sand when it comes to Google's business model. I'm not saying that Apple is perfect by any means, but every year Google gets more and more frightening.

 

[Gilligan's last elephant]

I think that many just stick their head in the sand when it comes to Google's business model. I'm not saying that Apple is perfect by any means, but every year Google gets more and more frightening.

So how about listing some of the ways that this will be to the detriment of people?

 

[Baymowe335]

I have to laugh at the mental gymnastics and hoops people will jump through to try to make this (yet again) seem like Apple is somehow doing poorly.

I really wonder - does your life happiness revolve around the requirement that a company fail?

They definitely don't own shares. If they did, they'd understand why Tim Cook is doing an amazing job and the company keeps delivering.

BTW, doesn't happen without delivering what people want.

 

[Falhófnir]

It's strange seeing that red slice less 50%.

Though a big chunk of the grey and yellow slices are directly attributable to iPhone as well - indeed, considering Android and macOS don't play all that well together you could probably even argue a good chunk of the blue slice is also iPhone dependent...

 

[MacBH928]

well, obviously you were wrong

tablets is a dying market is not something I came up with, its reported by everyone.
There is no real iPad competitor as all the Android ones quietly exited the market. Its easy, name one iPad competitor like you can name S10 as a competitor to the iPhone.
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i wouldn't say "really bad" as they are still moving a few million, but Mac sales have been on a steady decline for several quarters. Their revenues were buoyed by increased prices to keep the revenues numbers of Mac sales more steady and consistent.

but it's a dangerous game. price elasticity tends to mean that the more they raise the price, the less they sell

I believe this is the same effect now starting to show on the iPhone. raised prices help buoy revenue numbers, but decrease in volume. this gives confidence of revenue stability, but with the risk of decrease market share.

question is will these price points and volume stay consistent in the future, or is this just a start of trend? Apple is doing a smarter thing by branching out in services and other non i-device related businesses to help broaden their portfolio. this should alleviate much concern that investors have with Appe being a "one trick poney". but there's still concern that Apples iPhone halo affect could diminish revenues in other sectors like services and accessories should iPhone market penetration continue to shrink. (they're not selling watches and homepods if people don't have iphones to pair them with)

Problem is without volume numbers we're all left speculating. Revenues/profit alone doesn't dictate future performance as there are means via pricing to mask declines in sales.

well if they are raising prices to cover for lower volumes, we all know what this means. They are not doomed, but sales are declining.They have hit market saturation.

 

[MacBH928]

Google relying on advertising for 90% of their revenue is worse.

Think about this:

• Apple makes money selling products people want (iPhones, iPads, Mac, Watch).
• Google makes money selling products people actively try to avoid (ads) through ad blockers or browser add-ons.

Who do you think is in a more precarious position? Especially with governments looking at the data collection and usage by tech companies? A single government law restricting data collection could wipe out half of Google's revenue overnight.

your analogy is not exactly correct. Advertising is an industry, iphone is a product. We all have seen companies who die when their product is no longer popular. Blackberries, Sega console, Nokia phones, SAAB cars...etc . Google is very dominant in multi areas, they can monetize a lot of things.

Google Docs, Android, Smartphones, Gmail, Gdrive, YouTube, Maps, ...etc not to mention they are in the data center game . Even if data collection is limited Google still can advertise in many forms.

What will Apple do if iPhones sales decline? Increase iTunes prices? increase iPhone prices? Everything they provide is to be paid for.

 

[ipponrg]

They are a major competitor to Apple. They are constantly compared to Apple in articles about smartphones or earnings calls. It only makes sense to compare them. Especially when people are trying to claim Apple had a bad quarter and Samsung is "alright" when their profits tanked. Two quarters in a row.

That's because Samsung is a huge company with a very diversified product portfolio. Go to South Korea and see it for yourself.

 

[spinedoc77]

So how about listing some of the ways that this will be to the detriment of people?

Having every single shred of your privacy hoovered up by a company who's main business motivation is to sell that data? Hmm, let me think about that.

 

[ROGmaster]

They had their highest ever revenues (albeit by a small margin)

LoL, it was barely 1% higher(basically stagnation), that's as small as it can be.

The had a great quarter, so there's no excuses that need to be made (as I already previously stated).

Profits were 14% down, iphone unit sales were down etc. so it wasn't so great.
You are being disingenuous.

Samsung is absolutely relevant to this discussion.

No it's not, you brought Samsung into this discussion in order to make excuses for Apple.
If Apple's quarter would be as great as you imagine you wouldn't have any need to divert the discussion towards Samsung in a thread that nothing to do with Samsung in the first place, you would have simply used the numbers and percentages Apple presented.

When the majority of Android phones sold around the world are under $100 (and many starting at $39 like the ones I see at 7-11) it's a perfect example.

I bet you don't know any newly launched Android phone that stars at 39$ without doing a Google search. What you claimed of have seen are most likely old phone stocks that are on sale. Hardly representative of Android phones overall.
And how exactly do you know that the majority of Android phones sold around the world are under $100?
And what does that majority of Android phones mean in percentages?

I suppose you also like to compare Ford sales to BMW or Mercedes and claim BMW/Mercedes are failing because they sell fewer vehicles.

I never claimed X is failing because is selling fewer units that y but you are ignoring on purpure Apple's decline in unit sales.
And yes in a general comparison between care sales we would be comparing Fords, BMWs, VWs Audis, Porsches etc. because they are all cars. Simple logic.