Apple Q4 results – just above expectations

Last night Apple published financial results for the quarter ending September 28th.

The Company posted quarterly revenue of $64 billion, an increase of 2 percent from the year-ago quarter, and quarterly earnings per diluted share of $3.03.

The December-quarter outlook was a focal point heading into the release, and Apple came in ahead of expectations with the midpoint of that forecast.

• revenue between $85.5 billion and $89.5 billion
• gross margin between 37.5 percent and 38.5 percent
• operating expenses between $9.6 billion and $9.8 billion
• other income/(expense) of $200 million
• tax rate of approximately 16.5 percent

Shares were up 1.9% in after-hours trading.

Key take aways

“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO.

“Our strong business performance drove record Q4 EPS of $3.03 and record Q4 operating cash flow of $19.9 billion,” said Luca Maestri, Apple’s CFO. “We also returned over $21 billion to shareholders, including almost $18 billion in share repurchases and $3.5 billion in dividends and equivalents.

The news reflects the general trend with Apple over the past year: iPhone sales are down slightly, but service revenue hit an all-time high with 18% growth. In other words, Apple’s strategy to de-emphasise hardware sales and focusing more on subscription services seems to be working. Services are now larger than Mac and iPad sales combined. Wearables, Home and Accessories is also closing in on Mac sales vale ($6.5B compared to $6.9B) and growing at 50%. As Tim Cooke mentioned in the earning call this business of Apple Watch and Air Pods is larger than most fortune 500 companies and not many are growing at close to 50%.

That $64 billion in revenue is up 2 percent year over year compared to Q4 2018, with quarterly earnings per diluted share of $3.03, up 4 percent from Q4 2018.

iPhone sales — still Apple’s biggest moneymaker with 52% of revenue— continued to decline compared to last year, bringing in $33.36 billion in revenue compared to $36.76 billion last year, a drop of roughly 9.2 percent. On the flip side, Apple reported that it had reached a record high for its services business, which brought in $12.5 billion in Q4 (compared to $11.46 billion last quarter, and $10.6 billion year over year). Apple says it now has “over 450 million paid subscriptions across the services on our platform, compared to over 330 million just a year ago.

Mac revenue was also down nearly 5 percent to $6.99 billion.

iPads ($4.65 billion in revenue) and Apple’s wearables / home / accessories unit ($6.52 billion in revenue) both saw sizable jumps compared to last year.

Notably, Apple’s new service record comes before the launch of Apple TV Plus, perhaps its biggest bet yet on selling consumer subscriptions (although the number does include Apple’s new Arcade games service, which launched back in September).

Looking at the balance sheet during the last year the company purchased $66.8B of Apple stock and paid $14.1B of dividends. Apple also increased cash in the bank by $24B. 

The repurchasing scheme has reduced share count by about 312 million shares during the fiscal year a decline of 6.5%. This is part help drive EPS for the quarter to $3.05 compared to $2.94 last year and well above analyst expectations of $2.84.

At the time of writing stock is up 1.55% pr market.

See full report at Apple IR: