Apple Reports Record Results for 1Q 2018: $20B Profit on $88B Revenue, 77.3M iPhones

aapl 2017 logoApple today announced financial results for the first fiscal quarter of 2018, which corresponds to the fourth calendar quarter of 2017.

For the quarter, Apple posted revenue of $88.3 billion and net quarterly profit of $20.1 billion, or $3.89 per diluted share, compared to revenue of $78.4 billion and net quarterly profit of $17.9 billion, or $3.36 per diluted share, in the year-ago quarter. The revenue and earnings per share numbers were company records for any quarter in the company's history.

Gross margin for the quarter was 38.4 percent, compared to 38.5 percent in the year-ago quarter, with international sales accounting for 65 percent of revenue. Apple also declared an upcoming dividend payment of $0.63 per share, payable February 15 to shareholders of record as of February 12.

Screen Shot 2018 02 01 at 4
For the quarter, Apple sold 77.3 million iPhones, compared to 78.3 million in the year-ago quarter. iPad sales were up slightly to 13.2 million, up from 13.1 million a year ago, and Mac sales slipped to 5.1 million from 5.4 million.

“We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone lineup. iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November,” said Tim Cook, Apple’s CEO. “We’ve also achieved a significant milestone with our active installed base of devices reaching 1.3 billion in January. That’s an increase of 30 percent in just two years, which is a testament to the popularity of our products and the loyalty and satisfaction of our customers.”

Apple's guidance for the second quarter of fiscal 2018 includes expected revenue of $60-62 billion and gross margin between 38 and 38.5 percent.

Screen Shot 2018 02 01 at 4
Apple will provide live streaming of its fiscal Q1 2018 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

A loose summary of Apple's earnings call is embedded below in reverse chronological order.

3:03 pm: The conference call has concluded. This was only a loose summary, and we'll have much more coverage on MacRumors.com. Stay tuned.

3:03 pm: Luca Maestri says Apple's thought process about mergers and acquisitions hasn't changed. Apple acquired 19 companies in calendar year 2017. Thought process is always to acquire something that allows Apple to either accelerate its product roadmap, fill a gap in its portfolio, provide a new experience to customers. It's always with the customer experience in mind when we make acquisitions. We will continue to do so. We have plenty of financial flexibility, of course, and we even had that prior to tax reform. We'll talk more about capital in our March quarter. $163B is a large amount, and there are practical considerations around it. Tim Cook clarifies that Apple becoming net cash neutral over time means that its cash-debt will balance out.

2:57 pm: Tim Cook asked what the positioning of HomePod is. Cook: "It's an incredible product. Unbelievable audio experience in small form factor. Very smart assistant with Siri. Also can handle requests like home automation—turn the lights on, etc. You can also use HomePod as a speakerphone. If you're talking to your parents, it's unbelievable audio quality for speakerphone. You can have Siri call for you. Send messages. I think the use cases on this, much like our phones, will be broad based. Some will use it significantly for music, others may use it significantly as a digital assistant, and I think a majority of users will likely use all of it.

2:55 pm: Tim Cook says the number of active Apple devices is very important. Plays to strength of ecosystem. Fuels services business. He has a long belief that a 90-day clock on unit sales is a very surface way to view Apple. Far bigger thing is to look over a longer period of time, and customer satisfaction and engagement, and number of active devices, are all a part of that.

2:53 pm: Tim Cook asked about iPhone switchers. He says iPhone X was later in quarter, doesn't have meaningful data to share. Will wait until next quarter.

2:47 pm: Tim Cook: It's up to investors to focus on what they choose. The way I look at this, the numbers you quoted, I have a different view of them. Generally what we see with iPhone is that its reliability is fantastic. The previously-owned market has expanded in units over the years and you see, in many cases, carriers and retailers having very vibrant programs related to trading in older iPhones. Many customers hand down their iPhones now—I view this as a positive—more people on iPhone the better. On the battery topic, we did not consider in any way, shape, or form what it would do to upgrade rates. We did it because we thought it was the right thing to do for our customers. I don't know what effect it will have for our customers. It was not in our thought process of deciding to do what we've done.

2:44 pm: Toni Sacconaghi, Bernstein: iPhone unit growth has been relatively flat... suggests upgrade rate is going down or replacement cycle is elongating. Do you agree? Should investors be worried about that? Given consumers heightened awareness to replace batteries, rather than upgrade to a new iPhone, should investors also be concerned?

2:43 pm: Michael Olson at Piper Jaffray essentially asks if there will be more iPhone X-like devices in the future, like an iPhone X Plus. Tim Cook answers vaguely, says iPhone X sets up the next decade of Apple's smartphone design. "You can bet we're pulling that string."

2:40 pm: Luca Maestri says a weaker U.S. dollar, if sustained long term, will be positive for Apple, which reports its earnings in U.S. dollars.

2:39 pm: Apple CFO Luca Maestri: We believe iPhone revenue will grow double digits as compared to last year in the March quarter. iPhone sell-through growth will actually be accelerating compared to December quarter.

2:36 pm: Katy Huberty, Morgan Stanley: Growing double digits off such a large revenue base is impressive in itself, but if I look at March quarter guidance, it does assume a slower average weekly growth in total revenue and shipments vs. December quarter. How should we read into this modest slowdown? Any impact from the lower-priced battery replacements?

2:34 pm: Tim Cook reiterates that iPhone X has been most popular selling iPhone since it launched in early November. Cook says customer satisfaction is more important—says it's "off the charts" for iPhone X. He says Face ID has been "incredibly well received."

2:32 pm: Cross asks a follow-up question about iPhone X demand.

2:31 pm: Apple CFO Luca Maestri: We are now in a position where we have $285B of cash, $122B debt, we now have the flexibility to deploy this capital. We'll do this over time, as it's obviously a large amount. When you look at our track record of what we've done over the years, we're effectively returning to our investors about 100% of our free cash flow. We're going to be very thoughtful and deliberate about our spending, in the best interest of our long-time shareholders.

2:30 pm: Shannon Cross, Cross Research: How much cash do you need to run the business?

2:29 pm: Apple expects its tax rate will be 15 percent.

2:28 pm: Apple expects to become net cash neutral over time.

2:26 pm: Apple now has $285B in cash, cash equivalents, and marketable securities. $163B excluding debt.

2:25 pm: Apple Stores will now be in 21 countries when Vienna, Austria location opens later this month.

2:24 pm: Apple Stores conducted over 200,000 Today at Apple sessions during the quarter.

2:23 pm: LensCrafters to adopt 7,000 iPads for digital eye exams.

2:20 pm: Best quarter ever for Apple Watch. When adding results from Beats and AIrPods, total revenue from wearables was up almost 70% year-over-year. Second largest contributor to revenue after iPhone.

2:19 pm: 96% iPhone loyalty rate, highest ever measured, according to Counterpoint Research.

2:18 pm: Customer interest and satisfaction with iPhone very strong for consumers and business users. 451 Research: US satisfaction rate of 96% or higher across all iPhone models.

2:16 pm: Apple saw double-digit revenue growth in all of the geographic segments it tracks.

2:13 pm: Apple Watch Series 3 sales up more than 100% versus Apple Watch Series 2 sales last year.

2:11 pm: Worldwide, almost half of iPad sales were to first-time tablet buyers, or to those switching to Apple.

2:11 pm: Apple Pay is launching in Brazil soon.

2:10 pm: Apple Pay saw 50% year-over-year growth in merchant adoption. Accepted at two-thirds of top 100 retailers in United States.

2:10 pm: Apple Pay saw 50% year-over-year growth in merchant adoption. Two-thirds of top 100 retailers in United States.

2:09 pm: Apple Music, iCloud, and Apple Pay all saw growth in active users and revenue and had all-time record quarters.

2:09 pm: Apple passed 240 million paid subscribers across its services in the quarter, up 30 million from the previous quarter.

2:08 pm: All-time record quarter for App Store. 2,000+ ARKit-enabled apps spanning every category in App Store.

2:07 pm: Tim Cook is going over innovative features in the iPhone X.

2:06 pm: Tim Cook: iPhone X has been Apple's top selling iPhone every week since it launched.

2:06 pm: Tim Cook reminds investors that this quarter was 13 weeks, compared to 14 weeks in year-ago quarter. Apple's growth was actually 21% year-over-year on an adjusted basis.

2:05 pm: Apple's active installed base for devices reached 1.3 billion in January. All-time high. Tim Cook thanks customers for loyalty.

2:03 pm: Apple's earnings call is about to get underway!

2:02 pm: This was an all-time record quarter for Apple, with the highest revenue in the company's history. Just under $10B more than previous record. Apple's guidance of $60-$62B next quarter is relatively weak versus average $65.7B expectation among Wall Street analysts, however.

1:59 pm: AAPL is now up around 0.5 percent in after-hours trading.

1:58 pm: Apple's services business continues to grow, hitting roughly $8.5 billion revenue, up 18 percent versus year-ago quarter. Apple CEO Tim Cook has already called its services segment, which includes the App Store, Apple Music, iTunes, iCloud, and more, the size of a Fortune 100 company.

1:51 pm: "Other Products" revenue was up 36% year-over-year—suggests Apple Watch Series 3 and AirPods are selling well.

1:48 pm: Apple reported roughly $5.5 billion revenue from its "Other Products" category, which includes Apple TV, Apple Watch, Beats, and iPod touch. It also includes Apple accessories like AirPods, which are considered to be quite a popular product.

1:46 pm: iPad's average selling price was $445, up slightly from $423 in year-ago quarter. Mac's average selling price was essentially flat.

1:45 pm: Apple's average selling price for iPhone was $796, up from $695 in year-ago quarter. $999-and-up iPhone X certainly helped in that regard.

1:42 pm: AAPL is down between 1-1.5 percent in after-hours trading following the company's earnings results.

Top Rated Comments

deanthedev Avatar
42 months ago
How is this even possible?

On the iPhone X:

* It's way too expensive at $1,000. Nobody will pay that much.
* FaceID is useless, bring back TouchID.
* That notch. Not only ugly but interferes with all my content and videos.
* Glass back? I don't want a fragile phone.

On the iPhone 8:

* Not enough of an upgrade from the iPhone 7.
* They still kept the same basic design? Lame.

On Macs:

* Still no Mac Mini updates? People are waiting.
* iMac Pro? I can build a machine for 1/2 the price that's 3x as fast.
* Still only 16GB on the MBP? I require 32GB to be productive.


So my question for all the naysayers and analysts is this. How does it feel to be wrong? Not just wrong, but utterly and spectacularly wrong?
Score: 75 Votes (Like | Disagree)
lazard Avatar
42 months ago
How is this even possible?

On the iPhone X:

* It's way too expensive at $1,000. Nobody will pay that much.
* FaceID is useless, bring back TouchID.
* That notch. Not only ugly but interferes with all my content and videos.
* Glass back? I don't want a fragile phone.

On the iPhone 8:

* Not enough of an upgrade from the iPhone 7.
* They still kept the same basic design? Lame.

On Macs:

* Still no Mac Mini updates? People are waiting.
* iMac Pro? I can build a machine for 1/2 the price that's 3x as fast.
* Still only 16GB on the MBP? I require 32GB to be productive.


So my question for all the naysayers and analysts is this. How does it feel to be wrong? Not just wrong, but utterly and spectacularly wrong?
they sold 1M less iphones than same quarter last year.
Score: 28 Votes (Like | Disagree)
MacFather Avatar
42 months ago
Deleted.
Score: 22 Votes (Like | Disagree)
CWallace Avatar
42 months ago
What do these Mac numbers show us? A stagnation, greed, or both?
Looks like a stable market to me, with peaks during product refreshes. Overall Mac sales have been growing stronger than many PC OEM sales (Apple rose to fourth overall in 2017).


they sold 1M less iphones than same quarter last year.
Almost assuredly due to the iPhone X being available for less time than the iPhone 8 family and the wait for that model.


It's been pretty much a 100% consensus this would be a record breaking quarter since Apple's last reporting.
Yes, which is the point deanthedev is making - so many pundits and "analysts" have proclaimed the same "Apple is doomed" drumbeat all quarter and yet Apple posts record-breaking results yet again.
Score: 13 Votes (Like | Disagree)
Act3 Avatar
42 months ago
1 million less sold than Q1 of 2017. And that is with a completely redesigned model. This isn't a positive for a company that relies on the iPhone so much for their revenue.

EDIT:

*** Nevermind this, the quarter had one less week than the same quarter last year.******
Score: 12 Votes (Like | Disagree)
deanthedev Avatar
42 months ago
they sold 1M less iphones than same quarter last year.
Their revenues are way up, despite 1M fewer iPhones and flat sales for iPad and Mac.

That tells me they sold a lot of the iPhone X and that ASP is going to be higher.
Score: 11 Votes (Like | Disagree)

Top Stories

samsung experience 1

Samsung's 'iTest' Lets You Try a Galaxy Device on Your iPhone

Thursday April 8, 2021 12:42 pm PDT by
Samsung has launched "iTest," an interactive website experience that's designed to allow iPhone users to test out Android on a Galaxy device, or "sample the other side," as Samsung puts it. Subscribe to the MacRumors YouTube channel for more videos. The iTest website is being advertised in New Zealand, according to a MacRumors reader who came across the feature. Visiting the iTest website on...
sonny 2021 ipad mini pro dummies

Leaked Dummy Units Show iPad Mini 6 With Thick Bezels and Home Button, New iPad Pro Models

Thursday April 8, 2021 2:11 am PDT by
Rumors suggest Apple will release refreshed versions of the iPad mini and iPad Pro models in the first half of this year, potentially as soon as this month, and a new leak today has provided us with a possible preview of what to expect in terms of the devices' overall design and camera prospects. Tech leaker and Apple blogger Sonny Dickson this morning shared images on Twitter showing dummy ...
fake airpods 3

Counterfeit 'AirPods 3' Hit the Market Prior to Official Announcement

Friday April 9, 2021 2:45 am PDT by
Apple is expected to launch the third iteration of AirPods in the third quarter of this year. Rumors and reports suggest the new AirPods will feature an updated design more in line with the AirPods Pro, but lacking in "Pro" features such as active noise cancellation. Despite AirPods 3 not yet being officially announced by Apple, counterfeit products of the unreleased earbuds have already hit ...
iMessage Android featured

Apple's Rationale for Not Bringing iMessage to Android Revealed in Legal Documents

Friday April 9, 2021 2:22 am PDT by
It's no secret that Apple sees iMessage as a big enough selling point to keep the service exclusive to Apple devices, however new court filings submitted by Epic Games in its ongoing lawsuit with the company reveal just how Apple executives have rationalized their decision not to develop a version of iMessage for Android. Apple clearly recognizes the power that iMessage has to keep users...
nba tracking prompt orange

Two-Thirds of iPhone Users Expected to Block Ad Tracking

Friday April 9, 2021 7:19 am PDT by
As many as 68 percent of iPhone users are expected to deny advertisers permission to track them thanks to Apple's App Tracking Transparency feature, in what is beginning to look like a significant blow to the advertising industry (via AdWeek). With the launch of iOS 14.5, apps will have to receive explicit user permission before accessing an iPhone's advertising identifier or IDFA, which is...
iPhone 13 Battery Life Feature

DigiTimes: iPhone 13 Pro Models to Feature 120Hz ProMotion Refresh Rate and 15-20% Less Power Consumption

Friday April 9, 2021 12:52 am PDT by
The two premium "Pro" models of the upcoming iPhone 13 lineup will be equipped with a low-power LTPO display, enabling the iPhones to have a 120Hz refresh rate, according to industry sources cited by Taiwanese publication DigiTimes. According to today's paywalled report, Apple suppliers Samsung and LG Display are in the process of converting parts of their production capacity to produce LTPO ...
ehric

iPhone 12 Mini Missing From Top 5 Best Selling Smartphone List of January 2021

Friday April 9, 2021 4:58 am PDT by
According to market data compiled by Counterpoint Research, Apple's smallest iPhone since the 2016 iPhone SE, the iPhone 12 mini, struggled to obtain a spot in the top five list of best-selling smartphones in January of this year. According to the market data, the iPhone 12 mini came in eighth place for the best-selling smartphone worldwide in the first month of the year. However, the iPhone ...
Top Stories 56 Feature

Top Stories: 'Find My' Expansion, iPhone 13 Pro Mockup, Largest-Ever iMac?

Saturday April 10, 2021 6:00 am PDT by
Apple's AirTags may still be nowhere to be seen nearly two years after signs of them were first discovered, but Apple this week launched its Find My network accessory program that will let third-party devices integrate with the Find My app on Apple's platforms to make it easy to keep track of your items. This week also saw fresh rumors about the upcoming "iPhone 13" and new iMacs, while...
fortnite apple featured

Epic's Case Against Apple in Australia Might Be Over

Friday April 9, 2021 12:21 pm PDT by
Epic Games and Apple are involved in a highly public lawsuit in the United States, but Epic has also sued Apple in other countries, including Australia, in an attempt to boost its chances of getting a favorable ruling. Things aren't quite going Epic's way, however, as the justice overseeing the case today decided that he's going to let the two companies battle it out in the United States. ...
Apple TV Ray Light Teal Film

Apple Wants to Draw Subscribers to Apple TV+ With More Feature Films

Friday April 9, 2021 10:27 am PDT by
Apple is ramping up its efforts to produce feature films, according to a new report from The Information. Apple has a limited number of high profile films already, including "Palmer," "Cherry," and "Greyhound," and sees it as a way to draw more people into Apple TV+. Apple has been telling studio executives that it is aiming to do more than 10 to 12 original movies per year for Apple TV+,...