5 Most Important Takeaways from Apple’s 2nd Quarter Earnings Call
Credit: Daniel KorpaiApple on Tuesday officially reported the results for the first fiscal quarter of 2019 (which is actually the second fiscal quarter on Apple’s calendar). And despite concerns and analyst predictions, Apple’s total revenue of $58 billion was actually right in-line with its revised revenue guidance. But that doesn’t tell the whole story, so continue reading to learn the key takeaways from Apple’s Q2 2019 earnings call.
iPhone Sales Haven't Grown
Apple reported quarterly revenue of $58 billion, around a 5 percent decline year-over-year. Gross margin for Q2 2019 was 37.6 percent, which is down slightly compared to the 38.3 percent reported in the same quarter last year.
- iPhone: $31 billion
- iPad: $5.5 billion
- Mac: $4.9 billion
- Wearables, Home and Accessories: $5.1 billion
- Services: $11.5 billion
While iPhone revenue hasn’t increased, Apple seems to have stemmed the tide of declining sales somewhat. But other categories, like iPad, services and wearables, are continuing to boom. Apple also initiated a quarterly dividend payment increase year-over-year, from .73 cents to .77 cents per share.
Wearables, iPads and Services Are Booming
Q2 2019 was Apple’s best-ever quarter for its Services business. The company saw continued growth in its active installed base. Apple currently has 390 million paid subscribers and says it expects that number to reach half a billion in 2020. Additionally, the firm says it will focus on newly released or announced services in the interim, and noted that the company “wouldn’t do a service if (it) didn’t think it was meaningful.”
When it comes to hardware, Apple’s wearables business is booming. The category saw 50 percent growth in the last quarter year-over-year and is now the size of a Fortune 200 business on its own. Apple also reported a blockbuster quarter for iPad, with revenue up 22 percent from last year. Apple says it’s the highest revenue growth for the category in 6 years.
Apple ‘Feels Good’ About Qualcomm Resolution
One of the key things analysts were itching to ask Apple was the company’s resolution with Qualcomm. But Apple did not exactly elaborate about the resolution, with CEO Tim Cook only saying that the company is happy to put the litigation behind them and to have a direct license and supply agreement with the San Diego chipmaker. “We feel good about the resolution,” Cook said.
The only clue we got about the Apple-Qualcomm settlement is when someone questioned CFO Luca Maestri about gross margins. Maestri noted that Apple isn’t going to share financial details of the settlement, but pointed toward gross margin guidance for the June quarter — which “fully comprises” the company’s agreement with Qualcomm. Notably, that guidance hasn’t changed at all since Q2 2019. It’s still between 37 and 38 percent.
Apple’s Plans in China and India
Apple is playing the long game in the two largest smartphone markets in the world: China and India. When it comes to China, Apple is actually doing better than it has. The company reported increased year-over-year revenue performance in the country, which is a drastic change from last quarter’s mediocre results. Apple attributes that to trade-in and financing programs, price adjustments, and improving U.S.-China relations.
The Cupertino tech giant is also looking to make moves in India. Apple is looking to negotiate with the Indian government, including building out an Apple retail presence, and has set up a developer accelerator in the country. Cook admitted that it’s a “challenging market” and won’t be an “overnight success,” but says that the fact that it’s primarily an Android market means there’s a lot of potential there.
WWDC '19 Is Going to Be a Big One
One of the more interesting parts of the earnings call was an offhand comment about Apple’s continuing efforts across its various businesses. Specifically, Tim Cook said that the company is “as excited as ever” about its pipeline of hardware, software and services.
That’s a fairly generic thing to say, but Cook said that the company is excited to “share more at WWDC” — which is currently less than five weeks away. That could suggest that the developers' event in early June may have more on the table than just software, per last year’s WWDC docket. In fact, WWDC ’19 may just be a big event for software, hardware and services. As Cook said, “you are not going to want to miss this one.”