Lately, tech companies’ performance and stock prices have resembled a roller coaster, with highs and lows coming in rapid succession. It’s enough volatility to make anyone motion sick.
Some analysts were looking to Apple to help keep the tech biz on the rails this quarter. But it turns out the ride isn’t entirely smooth there, either. However, where the company did impress, a fair portion of the credit goes to its retail efforts and partnerships.
The Cupertino, Calif.-based company reported record-breaking results for its fiscal fourth quarter on Thursday, with revenue of $62.9 billion and quarterly earnings per diluted share of $2.91, beating expectations of $61.5 billion and $2.78, respectively. Both figures show major growth — 20 percent in revenue and 41 percent for EPS over the same quarter last year.
But unit sales disappointed. Although the company noted that it shipped its two billionth iOS device this quarter, iPhones sales were basically flat compared to last year. The stock sank 6.7 percent to $207.33 in after-hours trading.
In a note this week, Loup Ventures analyst and Apple expert Gene Munster warned investors to look beyond individual iPhone sales and see the bigger picture — namely that the tech giant is “finding new ways to make more money from their existing user base,” he wrote.
The thinking hews pretty close to Apple’s strategy.
“We set new Q4 records in all of our geographic segments and new all-time revenue records for the App Store, cloud services, AppleCare, Apple Music and Apple Pay,” Apple chief executive officer Tim Cook said on the earnings call Thursday. Apple services’ revenue exceeded last quarter’s $9.5 billion, reaching $10 billion. Cook highlighted strong growth in paid subscriptions, with more than 330 million across its ecosystem.
He spotlighted Apple Pay, calling it “the number-one mobile contactless payment service worldwide” by far. According to Cook, transaction volume tripled year-over-year and more than quadrupled PayPal mobile’s growth rate.
“As a testament to accelerating U.S. growth, Costco completed the rollout [of] Apple Pay to over 500 U.S. warehouses last quarter, while Neiman Marcus is now accepting Apple Pay at over 40 stores across the country,” he continued. “With these additions, 71 of the top 100 merchants and 60 percent of all U.S. retail locations support Apple Pay.”
The company also started pricing its devices higher last year, with the $1,000 iPhone X, and continued with the introduction of more expensive iPads and Macs just two days ago. The iPhone’s average price jumping 28 percent over last year fueled the enormous gains in EPS.
Still, Apple would prefer that people stop focusing on iPhone unit sales. The company wants to put more attention on the expansion of Apple’s newer devices — like the Apple Watch and HomePod — and its work on software tools like ARKit 2.0 for augmented reality or Siri Shortcuts, which allows partners to tie into Apple’s voice assistant.
Across these efforts, Cook waxed poetic more than once about the impact of Apple tools on the consumer experience in gaming and shopping, as well as its digital health-care initiatives. And a narrative fixating on phone shipments clearly gets in the way.
And chief financial officer Luca Maestri said the company will stop providing unit sales data, effective from the December quarter. “As we have stated many times, our objective is to make great products and services that enrich people’s lives, and to provide an unparalleled customer experience, so that our users are highly satisfied, loyal and engaged,” he said.
At that point, Apple will also refer to the “Other Products” category as “Wearables, Home and Accessories” to more accurately describe those devices. The change describes the company’s increasing focus on smartwatches and smart speakers, alongside the cash cow that its retail efforts are becoming.