Apple’s first quarter 2019 results include some bright spots

Apple has reported a 5% decline in Q1 profit but there were some bright spots in the results (Image zoom-zoom / iStockPhoto)

As expected, Apple on Tuesday announced first-quarter 2019 results that were decidedly lower than the initial guidance of US$89 billion to US$93 billion. For the holiday quarter, Apple posted revenue of US$84.3 billion and a net profit of US$19.9 billion, a 5%drop over last year and the clearest sign yet sign that iPhone sales are slowing.

We don’t know how much iPhone unit sales fell, of course, since Apple has stopped providing those numbers. But we do know how much revenue the iPhone brought in. For the holiday quarter, Apple made US$52 billion on iPhone sales, compared to US$61 billion in the year-ago quarter, a 15% drop. Assuming Apple sold fewer iPhones than last year, it’s hard to extrapolate what that means for models and sales.

In an interview with Reuters, Tim Cook stated that the company is thinking about changing its iPhone pricing policy in foreign markets. Currently, Apple sets iPhone prices in US dollars, which often translates to higher prices in foreign currency. Cook told Reuters that the company is considering changing that policy so that iPhone prices are set in the local currency. That would result in lower prices in foreign markets, and possibly spur sales.

During the results announcement, Cook stated that the foreign currency exchange as one of three factors that affect iPhone sales. He also said that the lack of iPhone subsidies and the battery replacement program (which was available for a reduced price in 2018) also are factors.

Elsewhere, Apple made US$6.7 billion in iPads sales (versus US$5.7 billion last year), and US$7.4 billion in Mac sales (an increase over last year’s US$6.9 billion). Also on the upswing was Services, which posted revenue of US$10.9 billion, a near-US$2 billion jump over the year-ago quarter. Apple’s Wearables, Home and Accessories category (previously Other) was also a big performer, earning US$7.3 billion compared to US$5.5 billion last year—a 33% jump.

As Apple CEO Tim Cook stressed in his letter to investors earlier this year, China was a particularly soft spot for Apple in the fourth quarter. The region generated US$13.2 billion during the three months from September to December compared with US$18 billion last year for a more than-25% drop.

Going forward, Apple expects the second quarter to come in under budget too. Revenue of US$55 billion to US$59 billion is expected compared to last year’s US$61.1 billion. Apple is likely being extremely conservative with its estimates for the second quarter after needing to revise its first-quarter guidance, but it’s still likely to be significantly lower than last year.

Apple put a positive spin on the results, with Tim Cook saying, “While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide.”

In after-hours trading, AAPL rose more than US$4 on the news.

With Roman Loyola

Macworld

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