A Layperson’s Thoughts on Today's Apple Earnings

Posted by Matt Birchler
— 2 min read

I’m much more of a product guy than a business guy, but because I’m into Apple, I just had to check out the quarterly results today. Here are my layperson feelings on what Apple announced.

iPhone X is a miracle product. How Apple has made a $1,000 phone their top seller for 6 months in a row is beyond me. While there’s constant clamor for Apple to lower iPhone prices, they defy expectations by making a ridiculously expensive phone that is so damn appealing that it outsells everything else. Amazing.

Wearables up 50% is great news for the Apple Watch and AirPods, the two best new products Apple has made since the iPad. Yeah, Beats and HomePod are in here too, but according to Apple, Apple Watch and AirPods accounted for 90% of the growth in this category.

Tell me if this is crazy, but “other” was up $1.8 billion in revenue over Q2 2017. If 90% of that was AirPods and Apple Watch, that leaves $180 million in growth from Beats, HomePod, and some other little stuff. Assuming Beats and everything else in here was flat, that’s about 500,000 HomePods. If that’s even close to true, then I’d say HomePod is a bigger success than I expected. This is real back-of-the-napkin math though, so this could be way off. I’m a bit skeptical since Apple declined to anything positive about HomePod’s sales in the call and merely said they were excited to get more features released and get it into more markets.

Services continue to look very strong. Say what you will about the quality of Apple’s services1, but their paid services are growing like crazy. Most of Apple’s revenue comes from the iPhone, but 40% of all non-iPhone dollars Apple makes are from services. They make twice as much money on services as they do on the iPad, and 50% more than they do on the Mac.

To put Apple’s service revenue in perspective, Facebook as a company ad $11.97 billion in revenue, in the same quarter, compared to Apple’s $9.19 billion. Microsoft’s cloud business made $6 billion in the quarter and Amazon’s cloud made $5 billion. All of these companies are seeing strong growth, but Apple’s numbers are more than a little impressive.

iPads are up, but not enough to make me super excited. Unit sales were up 2% and revenue was up 6%, so ASP appears to have climbed a tad. I’d love to see more, but when the Mac was down 3% and when unit sales of iPads more than double Macs, I think things are heading in the expected direction here too2.

  1. And I have. 
  2. This post, as well as everything you have read on BirchTree in the past 5 months has been from an iPad.