Apple shares in the middle of the trading session (May 1)

Record in Services, iPad Pro making it successful… check out the highlights of Apple’s 2nd fiscal quarter 2019

As expected, Apple yesterday released the financial results for its second fiscal quarter 2019. Revenue in the period was $ 58 billion (-5% compared to the same period in 2018), with net profit of $ 11.6 billion (-16%) and diluted earnings per share of $ 2.46 (-10%). International sales comprised 61% of all quarterly revenue and the gross margin in the period was 37.6% (if we consider only products, the margin was 31.2%).

As usual, the CEO Tim Cook and the CFO Luca Maestri held an audio conference to announce the results and comment a little on the company’s performance in the last period – and the projection for what is yet to come. In this event, whether during the speeches of the executives or in the question and answer session with analysts / journalists, they always paint interesting information. And we, of course, follow everything closely to bring you the highlights of the last quarter of the Apple.

The highlights

The company’s financial results were as expected by Apple, however, close to what they call the “upper limit of the guidance range” (ie, near the top of the forecast).

“We see this as a positive result, despite the headwinds of exchange rates,” said Cook. The numbers also surprised the financial market as a whole, which was expecting a lower result. Therefore, Apple shares opened the day today at a sharp rise.

Apple shares in the middle of the trading session (May 1)

Some factors contributed to this: the segment services (with the best quarter in history, sales of $ 11.5 billion and records for the App Store, AppleCare, Apple Pay, iCloud and more); the segment iPad (thanks to iPad Pro, revenues increased 21.5%, the highest in the last six years, with growth in all geographic segments and about half of the devices sold to new users); and the segment Wearable (Apple Watch, AirPods and others, which grew by almost 50%) – the CEO emphasized that AirPods (already on sale in Brazil) “are a cultural phenomenon”, while the CFO said the Apple Watch is the world’s best-selling smartwatch and that 75% of sales went to people who have never used a Watch before.

Speaking of Apple Pay, the company wants to end 2019 with the service present in 40 markets – soon, it should reach the Netherlands. New York public transport is expected to accept payments via Apple Pay by mid-year – here in Brazil, MetrôRio announced the news this week – and Ticketmaster has announced that it will accept payments on the web using Apple Pay, as well as most of the stadiums where NFL games take place. By the end of the year, there will be more than 10 billion transactions using the service!

Apple Pay in Brazil

There are now more than 390 million users subscribing to some type of Apple service (iCloud storage, Apple Music and Apple News +), an increase of 30 million compared to the previous quarter and 120 million compared to the figures for the same quarter in 2018. For 2020, the expectation of Apple is reaching 500 million subscriptions (after all, Apple Arcade and Apple TV + are coming there). Subscriptions to third-party applications have also seen great growth, at around 40%.

According to Cook, recent product price cuts in China have been well received by the public, making performance in the country improve – in addition, of course, to government incentives and negotiations between the United States and China in the tariff war.

It remains to be seen whether these price reductions reach countries other than China and India – Cook’s explanation for these adjustments in values ​​matches perfectly with our reality here in Brazil, but so far nothing here (except for occasional promotions made by retail chains) …

THE active installed base of Apple devices continues to grow in all geographic segments where the company operates and set a new record in the quarter (for all major product categories).

Current Mac family (Mac mini, MacBook Air, iMac, MacBook Pro and MacBook)

About the numbers referring to Macs, Cook believes that they were quite impacted due to restrictions in the supply of processors (this Intel…). Even so, the installed base of Macs reached a new record and about half of the computers sold in the quarter went to new users who were not part of the ecosystem.

This quarter, we took the Apple Watch Series 4 ECG app to Hong Kong and 19 European countries. As in the USA, hardly a day goes by without me receiving a letter or email from a customer in one of these countries, talking about how this feature has significantly changed his life. We believe that we are just beginning to explore ways in which we can help people actively explore their health… other examples are the Apple Heart Study, in partnership with Stanford, and Apple Health Records at medical institutions and the Veterans Affairs Department of the USA.

Cook also commented that he was very excited about the 2019 releases (hardware, software and services) and can’t wait to share some of these news at WWDC19, which will take place between the 3rd and 7th of June.

iPhone XS MaxiPhone XS Max | Image: Shutterstock.com

THE customer satisfaction continues high, according to a survey by 451 Research: putting the current iPhones (XS, XS Max and XR) in the same pie, we have 99% satisfaction. Although sales are down, Apple saw four times as much volume in its trade-in! In addition, 81% of companies surveyed plan to buy iPhones. Switching to iPads, the customer satisfaction rate was 93%, with 77% of consumers and 75% of companies planning to buy new models.

Apple ended the quarter with $ 225 billion in cash / marketable securities, with a liquidity of almost US $ 113 billion – which makes it possible to make investments in basically any business area. The company’s priority, however, remains the same: to maintain the cash necessary to run the operation, aiming at a more neutral net cash position. Given the confidence in the company’s future, the Board of Directors authorized an additional US $ 75 billion share buyback. Quarterly dividends have also been increased for the seventh time in less than seven years, to $ 0.77.

Questions and answers

Shannon Cross of Cross Research questioned Cook about the according to Qualcomm. The Apple CEO just said that the company is happy to leave the fight behind and happy to have a multi-year supply contract, saying he still feels good about the outcome.

Asked about investments that are already and that should still be done in the new services (Apple Arcade and Apple TV +), Maestri stated that, although they really need to invest heavily, the services have a very good margin of around 60%, which is something very positive for the Apple ecosystem.

Katy Huberty of Morgan Stanley noted that next quarter’s quarterly revenue has typically fallen by about 15% in the past five fiscal years, but that Apple now expects a sequential drop of “only” 8%. The CFO replied that the company is on a strong wave of revenue growth in non-iPhone categories and that the scenario in China is expected to continue to improve.

About India, Cook mentioned – as we have already disclosed here – that the company is manufacturing products there and that this is very important for Apple’s plans, since such a requirement is necessary for the implantation of stores in the country.

The fiscal quarter in graphics

Apple's second fiscal quarter of 2019 on graphics

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Apple's second fiscal quarter of 2019 on graphics

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Apple's second fiscal quarter of 2019 on graphics

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Apple's second fiscal quarter of 2019 on graphics

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Apple's second fiscal quarter of 2019 on graphics

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Apple's second fiscal quarter of 2019 on graphics

Projections for the next fiscal quarter

Looking ahead to the third fiscal quarter of 2019, Apple predicts revenue of $ 52.5-54.5 billion, gross margin between 37% and 38%, operating expenses between $ 8.7 and $ 8.8 billion, other income / (expenses) of US $ 250 million and a tax rate of approximately 16.5%.

via MacRumors, AppleInsider, MacStories