Call off the funeral arrangements: Turns out Apple is in fine health after all.
After weeks of rumors that the iPhone X is a dismal failure bringing down the entire lineup, Apple is showing receipts to the contrary. The company raked in $61.1 billion in revenue in the January-March quarter, up 16 percent year-over-year. Apple sold 52.2 million iPhones alone to the tune of $38 billion, bringing iPhone revenue up 14 percent from the same quarter last year. (Sales were up 2.9 percent.)
Apple CEO Tim Cook said the company sells more iPhone X units every week than any other iPhone it makes, and that’s been the case since the $999 device launched in November.
“This is the first cycle that we’ve ever had where the top-of-the-line iPhone model has also been the most popular,” Cook said during a conference call with analysts on May 1. “The iPhone X is a beloved product. Like a team wins the Super Bowl, maybe you’d want them to win by a few more points, but it’s a Super Bowl winner. That’s how I feel about [the iPhone X].”
Supply chain analysts have pointed to disappointing earnings and revenue forecasts from some of Apple’s suppliers overseas, which indicate that the company isn’t buying as many components for the iPhone X. But Apple’s earnings show that demand for the iPhone X remains strong, said GlobalData analyst Avi Greengart.
“As we get closer to the next launch cycle, iPhone X sales should drop quarter over quarter,” Greengart said. “However, the strength of the iPhone X the quarter after its launch suggests that this is not only an early adopter product.”
It may seem like Apple can’t possibly sustain iPhone sales for years to come, but in the company’s earnings call, Cook pointed out the fact that 500 million feature phones were sold in 2017, largely in emerging markets. Those buyers will eventually upgrade to smartphones. Apple hopes those smartphones will be iPhones.
Apple’s Other Billion-Dollar Businesses
The iPhone is the crown jewel in Apple’s crown, but the company also makes products and services that could be multi-billion-dollar businesses on their own.
The company pulled in $9.2 billion from services, which include Apple Music, iCloud, Apple Pay and the App Store. That’s a 31 percent jump year-over-year. Apple’s revenue from “other products,” which lumps together the Apple Watch, AirPods, Apple TV and HomePod, was up 38 percent to $3.95 billion.
Apple is bullish on services, in particular, because the company’s install base of devices has exceeded 1.3 billion — that means that there are tons of people with iPhones, iPads, Macs and Apple Watches who may subscribe to Apple Music or need iCloud storage or buy apps from the App Store at some point.
It’s not just one service in one part of the world that is responsible for that growth, Cook told analysts, though the company doesn’t break out revenue by service. Each service is performing well in each part of the world that Apple operates, and each is growing.
Greengart pointed to the services category’s growth quarter-over-quarter, which is a tough feat to pull off considering Q2 follows the holiday quarter, where Apple typically puts in its best performance.
“Subscriptions are playing a big role there,” Greengart said. “Apple's ecosystem is like a flywheel — once you get it going, it's easier to keep it going.”
Apple didn’t separate HomePod sales from the devices in its “other products” category, but the smart speaker has room to grow. Critics agree that the HomePod is a solid speaker, but it’s designed for Apple Music subscribers and could stand to be more well-rounded. (Siri could also use some improvements.)
Cook didn’t have much to say about devices in the pipeline, but he did say that health care is of particular interest to Apple.
Meanwhile, the company is sitting on a pile of cash that it can’t figure out what to do with, so it’s buying back $100 billion in stock from shareholders.