Apple's earnings were supposed to be good this quarter, but they turned about to be even better than expected, and the good news stretched across most of their product lines and services. Even the iPad is looking good again! Let's take a look at the highlights.
The Numbers Look Like the Apple of Two to Three Years Ago
Remember when Apple’s earnings seemed to keep going up and up and up every quarter, almost to the point that we all became numb to their success? It isn’t like Apple is destitute these days, as they continue to be the most profitable company on the planet. However, dips in iPhone sales, lack of overall growth, and plummeting iPad sales, have left Apple looking more mortal than they used to. However, the third quarter numbers look like a throwback to those days when their quarterly numbers broke records every time out.
Let’s run down the basics:
- $8.7 billion in profit
- Revenue of $45.4 billion
- 41 million iPhones, which is up slightly year over year. This is down slightly from last quarter, but better than expected amid the insanity of the iPhone 8 Rumor Mill.
- 11.4 million iPads sold. More on this in a sec.
- $7.3 in Services revenue, which continues to grow as a category. This is up 22% over last year.
- Apple Watch sales up 50% year over year.
The iPad is BACK, BABY!!!
The reviews of the new lower-cost iPad were largely positive back in the Spring, with the media recognizing the wisdom of Apple prioritizing price for their new “non-Pro” device. Reviews of the new iPad Pros were even more glowing, especially when it came to the new, larger default size of 10.5”, and the massive upgrades that are coming in iOS 11. However, despite the recognition of Apple’s improvements to their tablet line, a lot of the talk has centered on whether the additions would do any good, or if sales would continue their four year slide. Everyone in the tech press has been waiting for these numbers to find out if these new devices and software changes would register with consumers.
Boy did they! I honestly don’t think that even the most bullish Apple fanboy would have predicted this big of a jump in the middle of the year, but the numbers speak for themselves. The 11.4 million iPads sold constitutes the biggest non-holiday quarter for the iPad in over two years. This represents a 30% jump from last quarter, and 15% increase year over year. This is welcome news, and I’m sure Tim Cook is relieved to finally have stopped the iPad sales slide and that users and the press will finally have positive Apple tablet news to discuss.
The lone gray cloud in the iPad’s sunny sky is the fact that tablet revenue only increased 2%. However, in my opinion, this is just an indication that Apple made the right choice releasing the lower-cost iPad. It is pretty clear that this device is at the heart of iPad sales this quarter, and that’s fine. Apple adapted and has found a formulae that looks like it can work for them to extend the reach of the iPad.
Services With a Smile
Apple’s Services category continues to snowball into an effective buffer against market volatility. $7.3 may only be 14% of Apple’s total quarterly revenue, but continued growth of the category will make it an excellent source of relief from the natural ups and downs of yearly device sales cycles.
A Watch Worth Watching
I wish Apple would just release Watch sales figures already. However, we have enough to know that, while it isn’t the iPhone, it isn’t the poor Apple TV, either. Sales of Apple’s first wearable device continue to grow, which should help them to keep the early lead that they’ve established in the category.
The good news here is that increasing sales can lead to a virtuous cycle that Apple kind of missed out on at launch. When the over-inflated initial expectations for the first gen Apple Watch weren’t met and the first version of watchOS didn’t handle third party apps very well, a lot of developers pulled off the platform or scrapped plans to port their apps over. With the software now far more stable and friendly to keeping apps working faster and more reliably, as well as a larger user base, both developers and major accessory makers will be more likely to take a second look.
Crunch Time is Coming
The fourth quarter is coming, and Apple’s guidance for big iPhone sales points to a September release of the long-awaited iPhone 8. October is Apple’s new Fiscal Year, so if the new phone would launch until then, or wouldn’t be available in quantity for a month, these numbers would have been lower. Let this be a lesson to all you iPhone 8 rumor-mongers out there. Just sit back, relax, and let it all play out. It’s going to be good.
What do you think of Apple’s third quarter numbers? What do you think of the iPad’s big rebound? Let me know here in the Comments below, on Flipboard, on our Facebook page, or on Twitter @iPadInsightBlog.