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Apple shares up after company ‘beats the Street’ with its finances

Apple has announced the financial results for its fiscal 2018 second quarter that ended March 31, 2018. The company posted quarterly revenue of $61.1 billion, an increase of 16% from the year-ago quarter, and quarterly earnings per diluted share of $2.73, up 30%. International sales accounted for 65% of the quarter’s revenue.

The company gained 4.4% aftermarket on the financial results that “beat the Street” on earnings-per-share, revenue, iPhone and iPad shipments, and Services revenue. Apple sold 52.2 million iPhones (above the 52 million consensus and compared to 50.8 million last year), 9.1 million iPads (above the 8.8 million consensus, and compared to 10.2 million last year), 4.1 million Macs (meeting the consensus and compared to 4.2 million last year). 

Services grew 31% on the year to $9.1 billion, above the $8.48 billion consensus. In fact, quarter two was the best quarter in the history of Apple Services. CEO Tim Cook says each geographical area grew at least $25 while paid subscriptions grew 100 million to 270 million. The company is still on track for the goal to reach $16 billion in Services revenue. And Cook says Apple Pay will arrive in Norway, Poland, and Ukraine “within the next several months.”

The Apple App Store set new all-time revenue record in March quarter. And Apple Music paid subscriptions have passed 40 million.

What’s more, analysts had predicted Apple to lose Chinese market share due to low demand for premium smartphones. However, revenue in the region was up 21% in the quarter to $13 billion (but dropped 27% sequentially). 

“We’re thrilled to report our best March quarter ever, with strong revenue growth in iPhone, Services and Wearables,” said Cook in a press release. “Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter. We also grew revenue in all of our geographic segments, with over 20% growth in Greater China and Japan.”

Speaking of Wearables, the business — which consists of AirPods, Apple Watch and Beats headphones — is now size of Fortune 300 company. Cook says that the Apple Watch specifically has set a new March quarter record.

Apple finished the March quarter with a targeted range of 5-7 weeks of iPhone channel inventory. Cook says 78% of business buyers plan to purchase iPhones in the third quarter. When asked about iPhone X pricing, Cook noted the 14% revenue growth on its smartphones and said that was mainly driven by X, which was the most popular phone of the quarter.  

Regarding iPads, he said that half of iPad purchases came from those new to the table. Cook says the iPad’s active installed base hit an all-time high. 

As for the personal computer line, Mac installs are up double digits, with 50% of sales coming from new customers.

“Our business performed extremely well during the March quarter, as we grew earnings per share by 30% and generated over $15 billion in operating cash flow,” added Chief Financial Officer Luca Maestri. “With the greater flexibility we now have from access to our global cash, we can more efficiently invest in our U.S. operations and work toward a more optimal capital structure. Given our confidence in Apple’s future, we are very happy to announce that our Board has approved a new $100 billion share repurchase authorization and a 16% increase in our quarterly dividend.”

He added that Apple saw “great performance” from its retail and online stores, which produced their highest March quarter revenue ever. Apple stores hosted more than 250,000 of the “Today at Apple” sessions, with a particular focus on coding and app design. During the quarter, tech tech giant opened new stores in Austria and South Korea, its first in each country. There are now 502 global Apple retail stores.

The company will complete the execution of the previous $210 billion share repurchase authorization during the third fiscal quarter. Reflecting the approved increase, the Board has declared a cash dividend of $0.73 per share of Apple’s common stock payable on May 17 to shareholders of record as of the close of business on May 14, 2018.

The company also expects to continue to net-share-settle vesting restricted stock units. From the inception of its capital return program in August 2012 through March 2018, Apple has returned $275 billion to shareholders, including $200 billion in share repurchases. The management team and the Board will continue to review each element of the capital return program regularly and plan to provide an update on the program on an annual basis.

Apple is providing the following guidance for its fiscal 2018 third quarter:

  • Revenue between $51.5 billion and $53.5 billion;
  • Gross margin between 38% and 38.5%;
  • Operating expenses between $7.7 billion and $7.8 billion;
  • Other income/(expense) of $400 million;
  • A tax rate of approximately 14.5%.

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Dennis Sellers
the authorDennis Sellers
Dennis Sellers is the editor/publisher of Apple World Today. He’s been an “Apple journalist” since 1995 (starting with the first big Apple news site, MacCentral). He loves to read, run, play sports, and watch movies.