Apple earnings HOT take:
Clearly, the iPhone continues to be the real driver of growth for Apple despite it releasing a litany of new products over the past year (Apple Pay, Watch, TV, rumors of a p2p product, etc). While these may enhance the value of having an iPhone, its obvious that when you talk about financials and the success of the company going forward the phone is its lifeblood and all the other stuff is noise (read: 51 billion vs. 4.3 billion). Note that once again there are NO specific line item numbers about Apply Pay or the Watch. It will be telling to see how the Watch performs, particularly version 2.0, and whether or not it can be a main revenue generator for the company. Apple Pay will likely help it maintain healthy margins (it costs it virtually nothing and gets paid an interchange fee from bank issuers), but it will never, in my estimation, be of mainstream adoption enough to produce real revenue (the only caveat here being if it actually gets into the credit card business).
On the numbers:
For the quarter, they sold 74.77 million iPhones. Pretty incredible number despite it being lower than expectations. I suspect that many of the older generation phones did well and have increasingly captured more and more of the share especially in emerging markets (although Apple doesn’t release #’s of these products). Also important to realize that Apple has gotten very, very creative in the ways they are selling the phones. From trade-in programs to renting to installment plans and financing, they’ve adopted a number of tactics that have had real impact in capturing additional demand. This will only continue and they have figured out how to make sure they get people upgrading every year / few years that will keep iPhone sales elevated (has anyone every switched from iPhone to Android? Maybe, but not many). The cycle of upgrading to the ‘higher’ version is happening at all levels and in all places — it will keep Apple sales surging unless there is a huge event or they create a device so good that noone will want the next one (which is extremely unlikely) or a new competitor comes along (more unlikely).
Even more impressive is the geographic split of total revenue on a year/year change view: with a decline in the Americas of 4% and Japan of 12% yet 14% increase in China and 4% increase in Europe. So a 14% increase in China despite the US dollar reducing Chinese consumer purchasing power + GDP decline. IMO that number stays there / increases over the coming years. This was only the second full year of having full capacity in China with China Mobile.
How the iPhone has done in all of its first quarters (from Oct-Dec):
At the end of the day, this company did $51 billion in Revenue from just the iPhone this quarter (7bil from iPad, 6.7bil from Mac, 6bil from Services and 4.3bil from Other Products — which includes TV, Watch, Beats products and all other accessories). Google did $18 billion as a company for the quarter. Microsoft did $20 billion. Exxon Mobile did $4.2 billion.
Going forward I’m watching the growth rate in China and the Americas, but the numbers are as impressive as ever. The 6S is also a second iteration of the new model, which always does worse (see 47mil — 51mil jump). The big, big number for the company will be pre-sales of the iPhone 7 or whatever its called next year since it should outpace this past quarter’s growth significantly. I’d definitely buy the stock once it sells off on the open tmw (down like 2.5%) as people are scared by the lower than expected number. Don’t forget that a huge number of people in the world has a basic mobile phone and Apple has only sold about 800 million phones since 2008.