Apple’s Quarterly Earnings Were Strong, but the iPad Took it on the Chin

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Apple was projected to have a strong Holiday quarter and their own guidance predicted such, but today brought confirmation that they did even better than expected. They beat their projection of $85.5 billion to $89.5 billion by taking in $91.8 billion for Q1 of financial year 2020. Apple also beat the street’s estimate of $4.54 per share profit by posting $4.99 for the quarter.

As for how the quarter played out, it was hardware that lead the way for Apple, specifically the iPhone. The 11 and 11 Pro reportedly sold very well as the smartphone category brought in almost $56 billion in revenue, an increase of $4 billion and 7.6% year over year. Considering all of the negativity surrounding iPhone sales over the last year, this uptick is certainly welcome news for Apple.

While the iPhone brought in a whopping 61% of Apple’s revenue, the wearables category was the winner in growth. The Apple Watch, AirPods, Beats, and HomePod came in at $10 billion in revenue, but the increase of almost $3 billion is a sizable 37% increase.

Along with the solid hardware sales, the growth of Apple’s Services category has also continued. Revenue increased from $10.88 billion to $12.72 billion during Q1. According to Tim Cook, this represents another record for this category.

Unfortunately, not all of Apple’s hardware performed as well last quarter. First off, revenue for Macs was down 3.4%. Considering that the Mac Pro and the new 16″ MacBook Pro, both of which drew rave reviews, came out late in the year, this could be just a temporary dip.

Bringing up the rear, the iPad posted its poorest quarter in a while, at least as far as revenue goes. The $5.98 billion in sales is a steep 11% decrease year over year. While that is a significant dip for Apple’s tablets, there is a possible explanation. The company released two new iPad Pros last Fall, both of which reportedly sold well during the 2018 Holidays. While Apple no longer reports direct units sales for any category, the average price per unit was high enough to indicate strong sales of the more expensive devices during Q1 2019.

In contrast, Apple lacked new iPad Pro models to tout during the 2019 Holiday season. The most discounted and presumably highest selling tablet was the base model 10.2″ iPad. While it likely did sell well thanks to its great in of features and aggressive pricing, a device that is priced less than half of either Pro models certainly brought the APU and total revenue for the iPad down significantly for the quarter.

Apple should be set up for a solid 2020, overall. 5G is coming to the iPhone. The Apple Watch should continue to sell well, as well as the company’s other wearables. Apple’s Services should continue their solid growth. With new hardware coming and good recent reviews, the Mac should perform better this year, as well.

The biggest unknown today is the iPad. Will revenue growth return with the release of new iPad Pros sometime this year? It’s hard to say today, but hopefully the iPad hardware that is released over the course of 2020 is enough to move the needle back in the right direction.


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