Flash News: Apples iPhone revenue, once bombproof, is officially in retreat with 15% shortfall

Here's what Apple's earnings numbers tell us

Apple's iPhone revenue, which not so long ago appeared to be rising inexorably, is now officially in retreat, with a 15% shortfall year-over-year according to its latest earnings statement – and CEO Tim Cook has explained what's gone wrong.

The company's total revenue was $84.3 billion (about £67bn, AU$120bn) for the last three quarters ending on December 29. For almost any other company, this would be an impressive number.

However, for Apple, this is a rare earnings shortfall of $9 billion (about £7.14bn, AU$12.9b) compared to what it had previously forecast for the quarter: a high of $93 billion (about £74bn, AU$133bn).

Apple earnings highlights and breakdown

Each quarter, Apple forecasts high and low numbers it expects for the next quarter's earnings. Apple is notoriously conservative with these numbers and hasn't missed in its predictions since 2002, almost 17 years ago.

In other words, Apple has met and often greatly exceeded its projections for 67 straight quarters up until now. And it all comes down to iPhone sales.

Here's the breakdown from Apple's official earnings report:

• iPhone: $51.9B (Q4 2018) vs. $ 61.1B (Q4 2017)
• Mac: $7.4B (Q4 2018) vs. $6.8B (Q4 2017)
• iPad: $6.7B (Q4 2018) vs. $5.7B (Q4 2017)
• Wearables, Home and Accessories: $7.3B (Q4 2018) vs. $5.4B (Q4 2017)
• Services: $10.8B (Q4 2018) vs. $9.1B (Q4 2017)
• Total net sales: $84.3B (Q4 2018) vs. $ 88.2B (Q4 2017)

Apple did warn us about at the start of this year of the impending shortfall. It blamed China's economy and its discounted iPhone battery replacement program for the lack of smartphone upgrades in 2019, as well as fewer subsidies from carriers for iPhone purchases.

“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 Cook in Apple's earnings press release.

More: Apple defends iPhone XS pricing, says it's absorbing cost overseas
Highlighting Apple's new areas of growth

The headline is that iPhone revenue declined by 15%, but Cook, in Apple's earnings conference call, stressed that other products and services grew 19% year-over-year.

He specifically broke out services revenue, which had an all-time high of $10.9 billion, or up 19% year-over-year. Services hit 360 million subscribers, up over 100 million from last year.

We know that Apple is investing heavily in services, with a streaming platform rumored to be due out in April. He didn't allude to the streaming platform yet but did mention that Apple Music has 50 million paid subscribers and Apple News has 85 million active users in the three markets it's life in (US, UK, and Australia).

Apple's Mac and Wearables (meaning Apple Watch and AirPods) businesses are also on the upswing, growing 9% and 33%, respectively.

iPad revenue grew 17%, and Cook spent time in the conference call talking up the edge-to-edge iPad Pro screen. He didn't break down how the iPad Pro did vs the cheaper iPad 9.7.

Apple is putting the spotlight on services and other sectors, but you can still expect it to launch the iPhone 11 in (or around) September, and it may be joined by an iPhone 11 XR and iPhone 11 Max. Revenue projections can change, but earning habits die hard.



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