Tech

Apple rises as earnings and iPhone sales smash expectations

Key Points
  • Apple reported revenue and profit significantly higher than what Wall Street analysts expected.
  • It's Apple's biggest quarter of the year and includes important holiday sales.
  • "It was sort of a blockbuster quarter all the way around," Apple CEO Tim Cook told CNBC.
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Tim Cook on Q1 2020 earnings: iPhone 11 remains top seller

Apple reported revenue and profit significantly higher than what Wall Street analysts expected and spiked as much as 3% before settling down up around 1% in after-hours trading.

Apple's revenue was up 9% to $91.8 billion, which beat its own guidance. That's a significant change from the same quarter last year when it had to revise its revenue guidance down mid-quarter based on weakness in China.

Apple's earnings were partially powered by iPhone revenue, which was up 8% on the strength of new iPhone models to $55.96 billion.

"It was sort of a blockbuster quarter all the way around," Apple CEO Tim Cook told CNBC's Josh Lipton.

Here's how Apple did compared to Refinitiv consensus estimates:

  • EPS: $4.99 vs. $4.55 estimated
  • Revenue: $91.8 billion vs. $88.50 billion estimated
  • iPhone revenue: $55.96 billion vs. $51.62 billion estimated
  • Services revenue: $12.7 billion vs. $13.07 billion estimated
  • Other products revenue: $10 billion vs. $9.52 billion estimate
  • Gross margin: 38.4% vs. 38.1% estimated
  • Q2 revenue guidance: $63 billion to $67 billion vs. $62.45 billion
  • Q2 margin guidance: 38% to 39% vs. 38.2%

However, Apple's range of guidance for next quarter is wider than typical, a change that Cook attributed to uncertainty caused by the deadly coronavirus, which has shut down travel in parts of China.

"As you can see from the range, anticipates some level of issue there. Otherwise, we would not have a $4 billion range," Cook said.

Cook said that Apple's "Greater China" segment, which also includes Taiwan and Hong Kong, had returned to growth in the quarter, which ended in December.

Investors in recent months have turned more attention on Apple's "Other Products" category, which includes Apple Watch and AirPods, two products that Apple said it could not make enough of during the quarter. Cook said that there is still more demand than supply for the $199 Apple Watch Series 3 and the $249 AirPods Pro.

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Dan Niles on Apple's Q1 2020 earnings

Apple said that its "Other Products" category did $10 billion in sales during the quarter, and that Apple Watch, AirPods, and Beats headphones alone would be a "Fortune 150" company.

Apple's services business, which comprises online software like iCloud, warranties like AppleCare, and content like Apple TV+, was up 17% year-over-year to $12.7 billion.

Cook said in the interview with Lipton that he was pleased with the number of subscribers for Apple TV+, a new video streaming services that Apple released last fall.

"It's not a hobby, it's a real business," Cook said.

Cook said that Apple now has 1.5 billion active devices in use, an update from the 1.4 billion number that the company previously disclosed.

Correction: Apple offered Q2 margin guidance of 38% to 39%. iPhone revenue was $55.96 billion.