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Apple Posts $64 Billion Revenue In Fourth Quarter As iPhone Sales Drop By $3 Billion

Oct 30, 2019
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Cupertino tech giant Apple reported its fourth-quarter 2019 earnings today. The company has earned $64 billion over the past three months, in a modest $1 billion increase over the year. Earnings-per-share stand at $3.03 and operating cash flows to the company are $19.9 billion. Analysts had expected Apple to earn $62.9 billion in revenue, and post $2.84 in earnings per share. Net Income for the quarter is $13 billion, down from $14 billion Apple posted in fourth quarter 2018, and up from the $10 billion Apple earned the previous quarter. However, the sequential increase also includes revenue from the 2019 iPhone lineup, so the real concern once again is a drop in net income.

Apple Posts Fourth Quarter 2019 Earnings - Company Reports $3.03 EPS, $64 Billion Revenue & $10 Billion Net Income

The first thing that's clear when we look at Apple's balance sheet for the year is the fact that the company's push in services is working. Apple earned $52.8 billion from selling its products last year, and this revenue has dropped by $1 billion to $51.5 billion in 4Q19. Services, on the other hand, have raked in $12.5 billion this quarter, up from the $9.981 billion they brought in the year before.

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Moving towards the big feature of every Apple (NASDAQ:AAPL) earnings release; the iPhone. The Cupertino tech giant's fourth-quarter 2019 marks another quarter where the iconic smartphone has failed to grow annually. The iPhone has earned Apple $33 billion in revenue this year, marking for a $3 billion drop from a year back and a $7 billion sequential increase. This is the smallest decrease across Apple's first three fiscal quarters explained Mr. Tim Cook during the company's earnings call following the release. Consequently, the CEO is bullish about the smartphone's future.

Sales in China haven't worked for the company this quarter either. Apple's lost approximately $300 million in sales in Greater China in 4Q19 despite reports of the iPhone 11 performing strongly in the country. Apple has also managed to bring down a 24% revenue decline in China from the first quarter of 2019 to a 2% decline this quarter. This reversal is due to pricing/trade-in programs, thawing of trade tensions and new product features offered by Apple in the country, revealed Mr. Cook.

At this point, it's important to note that the iPhone's popularity can be gauged correctly only after the holiday season is over, with the real sales figures flowing in during Apple's first fiscal quarter of the year.

Apple fourth quarter 2019 earnings.

According to Cook, the company has managed to grow revenues despite a $1 billion foreign exchange drag; revenue for App Store, Cloud and other services hit a record high; and Apple hopes to double its services revenue of 2016 in fiscal year 2020. The iPhone maker has confirmed that its payment service Apple Pay beat PayPal in the number of transactions carried out in the fourth quarter of 2019.

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Wearables have let the company make up for some of the revenue deficit that's resulted from a drop in iPhone sales. Apple generated 17% growth through the iPad Pro in 4Q19, and it generated $6.991 billion through the Mac. The decline in Mac revenue (down from $7.411 billion a year back) is due to an upgraded product mix, explained company CFO Luca Maestri.

Apple Care has had its best quarter to date due to strong service agreements.

Apple also reports 85% and 97% customer and business satisfaction percentages for the iPad. The average revenue per user from Apple services has increased consistently, according to the company's data. This is reflected in the growth in Services revenue highlighted above.

“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, as we continue on our path to reaching a net cash neutral position over time.”

Apple has declared a $0.77 dividend per share this quarter. This will be payable on November 14th to shareholders in the record on 11th November.

Apple (NASDAQ:AAPL) is providing the following guidance for its fiscal 2020 first quarter:

  • 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 $200 million
  • tax rate of approximately 16.5 percent
In Billions ($):4Q193Q194Q183Q18FY18SEQ
(19')
SEQ
(18')
Revenues:64.0453.862.953.3265.61.149.6
Cost of Sales:39.733.638.832.8163.80.96.0
Operational Expenses:8.78.78.07.830.90.71.2
Net Income:13.71014.111.559.5(0.4)2.6
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