Apple reports Q1 results, slow iPhone sales pull down revenue

After revising the guidance for Apple's fiscal 2019 first quarter to $84 billion (approximately) in revenue and approximately 38 per cent gross margins earlier this month, the Cupertino giant has announced the results for the first quarter. For fiscal ending December 29, 2018, the company posted quarterly revenue of $84.3 billion, a decline of 5 per cent from the year-ago quarter.

According to the company, the iPhone revenues declined 15 per cent from the prior year, whereas the total revenue from all other products and services grew by 19 per cent. Services revenue reached an all-time high of $10.9 billion, up 19 per cent over the prior year. Revenue from Mac and Wearables, Home and Accessories grew 9 per cent and 33 per cent, respectively, and revenue from iPad grew 17 per cent.

"While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate that the underlying strength of our business runs deep and wide," said Tim Cook, Apple's CEO.

During the earnings call this morning, Cook highlighted the four factors that impacted Apple's results to be the different iPhone launch timing from a year ago, FX headwinds, supply constraints on certain products, and macroeconomic conditions in emerging markets. He says, "One of those factors, weak macro conditions in some emerging markets, was significantly more severe than we originally foresaw, especially in Greater China. As our letter noted, that challenge was compounded by quarterly iPhone upgrades that were lower than we anticipated."

Apple's revenue in Greater China was down by $4.8 billion from last year with declines across iPhone, Mac, and iPad. Most of the shortfall relative to the original guidance and over 100 per cent of worldwide, year over year revenue decline was driven by Apple's performance in Greater China. Apple says that despite iPhone upgrades being lower than anticipated, the business grew outside of China including new records in the America, Western Europe, Central and Eastern Europe, and rest of Asia Pacific segment. Apple had record performance in large markets including the United States, Canada, Mexico, Germany, Italy, Spain, and Korea.

A few factors resulting in slowing down sales of iPhones have been customers holding on to their older iPhones a bit longer than in the past, iPhone subsidies are becoming increasingly less common, and foreign exchange, as the relative strength of the US dollar has made Apple products more expensive in many parts of the world.

However, Apple's total active installed base of devices has grown from 1.3 billion at the end of January 2018 to 1.4 billion by the end of December, reaching a new all-time high for each of the main product categories and for all five of geographic segments. "That's a great testament to the satisfaction and loyalty of our customers, and it's driving our services business to new records thanks to our large and fast-growing ecosystem," added Cook.