SAN JOSE, Calif. — Apple reported record quarterly and annual results as revenues rose 12 percent with its biggest growth in services. Apple’s tablet and Mac sales were up strongly, but iPhone sales — which make up the brunt of its business — were nearly flat in units and revenues compared to last year.
Analysts asked multiple questions about reports Apple is having trouble ramping the iPhone X and expectations for its sales, but executives gave no fresh insights. CEO Tom Cook repeatedly noted it’s the first time Apple is releasing three high-end iPhones and has a staggered launch of multiple handsets.
“Some customers couldn’t look at [all three new iPhone models] until today,” said Cook, noting sales in Australia started during the quarterly call with analysts. “The truth is we don’t know [what will happen but] we are very bullish…we’re going to learn something,” he said.
Analysts wondered aloud if Apple would be in short supply of the iPhone X for more than a quarter. They asked for details Apple had supplied with prior launches such as sales in the first 24 hours or forecasts for when supply and demand would be in balance.
The iPhone X ramp “is going well considering it’s the most advanced iPhone we’ve created and has lots of new technologies in it. We’re increasing output week by week, and we will get as many as possible to customers as soon as possible. But I can’t predict when the balance will happen,” Cook said.
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Apple sold more than 10.3 million iPads in the quarter, up 11 percent, and more than 5.3 million Macs, up 10 percent in a flat PC market. Sales of more than 46.6 million iPhones was up just 3 percent from the same period last year.
Apple saw increases across the board, but the smallest ones were in handsets. Click to enlarge. (Source: Apple)
Services including sales of apps and music streaming was the big success, rising 34 percent to $8.5 billion. Greater China, which includes Taiwan and Hong Kong, was also a strong point, recording a 12 percent sales increase for the year after declining last year.
Overall, Apple posted quarterly revenue of $52.6 billion and a 24 percent increase in earnings per share to $2.07. It forecasted sales next quarter of about $85.5 billion.
“We’re firing on all cylinders. That gives us confidence we are headed into our best holiday season ever,” Cook said.
Rising memory process were one downside for Apple. Gross margins declined by 40 basis points in the quarter and 110 basis points in the fiscal year due to increasing costs for DRAM and flash.
Looking ahead, Cook continued to express optimism for augmented reality, one of the new features of the latest handsets. However, it’s not clear how Apple will make money on AR aside from its use as a driver to sell smartphones.
“I view AR as profound, not the apps on the App Store today, but what it will and can be,” he said, suggesting a wide range of consumer and business use cases. Asked how Apple will monetize AR, he said, “we’re focused on the experience right now.”
— Rick Merritt, Silicon Valley Bureau Chief, EE Times