Apple’s Q1 2019 Results: iPhone Bad, the Rest Good

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Yes, iPhone revenues fell off a small cliff this quarter due to slower sales in China, as Apple had warned that they would, but all of the company’s other products and services posted revenue gains over the year-ago quarter.

Growth in Apple’s other revenue categories shows that Apple isn’t just a one-trick pony.

Judging by the numbers that statement seems to still be a bit premature. Services earnings were up by less than $2B. The iPhone drop was $9B. The other categories don’t come close to making up for that $7B gap. Which is of course why their overall earnings took a big hit (for the first time in a while, admittedly).

The next quarters will have to show if Apple can recover iPhone earnings. If not, their other categories will need to grow a whole lot faster than so far should they be able to make up for that.


    January 30

Growth in Apple’s other revenue categories shows that Apple isn’t just a one-trick pony.

Judging by the numbers that statement seems to still be a bit premature. Services earnings were up by less than $2B.

Just under $2B isn’t shabby at all, especially since it’s a 19% above last year.

“Revenue for the company’s services segment — a catch-all category that includes Apple Pay, Apple Music and iCloud storage — topped $10.9 billion, though, marking a 19 percent year-over-year increase. Apple reported a gross margin in its services segment of 62.8 percent.”

Just this week Apple announced a number of major retailers signed up for Apple Pay, bringing the total to 74 of the top 100 major US retailers:

In the near future, there’s the no longer secret subscription video service that’s soon to released, as well as a news and periodical subscription offering. And lots of rumors have been swirling about an upcoming subscription gaming service. Down the road there’s autonomous transportation, AR/VR. Personally, I thin the bet on services will play out well as time marches on.

The iPhone drop was $9B. The other categories don’t come close to making up for that $7B gap. Which is of course why their overall earnings took a big hit (for the first time in a while, admittedly).

Yes, this number does suck compared to the last 10-15 years, but it isn’t as bad as the big majority on Wall St. assumed was going to be. Apple beat the revised estimates, so the stock went up:

I don’t think I see it as that way. Apple still posted $84 billion with a capital B in revenues, and net profits of nearly $20 billion with a capital B. These are unimaginably large numbers. This is not a company that’s hurting in any known universe, so it’s not like there’s anything to make up for besides the previous year’s performance under different macroeconomic conditions in one major market.

And even if China continues to slide compared to what it did before, what is the actual harm to Apple if it makes a few billion less per quarter? There’s no requirement that a company continue to grow, and the growth has to stop at some point. Sure, the stock price might drop, but so what? That’s all predicted on future beliefs anyway, not on reality.

To my mind, what’s actually important is that Apple remains profitable, and at a level where there’s enough money to spend on potentially expensive R&D and manufacturing so there’s never a resource constraint on what it wants to develop and build.

There’s another interesting analysis here:

Indeed, how can one say that “Apple’s iPhone business may be struggling” if Apple rakes in so much money for selling iPhones even if they stopped to increase in that segment?


As an Apple user I definitely agree with you, Adam. As long as Apple makes profit so that they can fund R&D work to develop Macs, iPhones/iPads, and their OSes, that’s good enough for me.

But the whole kerfuffle Apple got into was not related to any of that, but shareholders’ expectations of steadily rising earnings. Indeed, in their world growth does not know any limits and stagnating earnings are grounds for grave concern. And it is that world and how it evaluates Apple that has put Tim in the recent spotlight.

I think Tim is doing pretty well at saying that Apple is in it for the long term. It may not protect the stock price, but for the most part, the stock price is irrelevant. It might make it a little harder for Apple to attract top talent with stock options, but it’s unrelated to the actual performance of the company.

Apple isn’t alone in having a drop in smartphone shipments—with only a few exceptions, pretty much every other smartphone manufacturer did as well. Got this from a research company.

Global smartphone market ends 2018 on downturn
By Gerrit Schneemann, smartphones senior research analyst, IHS Markit;
Wayne Lam, mobile devices and networks director, IHS Markit; and
Jusy Hong, mobile handset devices director, IHS Markit

Global smartphone shipments recorded a negative year-over-year growth rate in the fourth quarter (Q4) of 2018, for a third consecutive quarter. According to IHS Markit preliminary smartphone data, global smartphone shipments reached 365.2 million units in Q4 2018, which is a 5.7 percent y/y decline. For the 2018 calendar year, shipments declined 2.4 percent compared to the previous year, from 1.44 billion units in 2017 to 1.41 billion units in 2018.

Following is an overview of the smartphone market leaders in 2018, based on unit shipments:

Samsung Electronics

Samsung Electronics maintained its shipment-volume lead, shipping 70.2 million units in Q4 2018. Samsung’s negative growth rate in 2018 continued, as shipments declined 5.5 percent compared to the same quarter of 2017. As a result, its market share fell to 19.2 percent in Q4 2018, which is flat compared to the previous year. Severe competition from Chinese rivals in many regions continued to impact Samsung’s business – and has led to Samsung changing its strategy for how new technologies are deployed in the company’s product range. For example, the first triple-camera Samsung device was a Galaxy A phone and, instead of a Galaxy S device, Samsung released the world’s first quad-camera smartphone – the Galaxy A9 – last year.

Overall Samsung smartphone shipment volume declined 8 percent, falling from 316 million units in 2017 to 290 million units in 2018. This is the first time Samsung shipped fewer than 300 million units in any year since 2014.


Huawei shipped 60.5 million units in Q4 2018, rising 47.7 percent, year over year. The company continued its double-digit y/y growth for the fourth consecutive quarter, growing in most of regions, except North America where Huawei has little exposure. Fast growing markets for Huawei include Europe, Middle East and Africa. In 2018, Huawei was able to exceed Apple in unit-based shipments for three consecutive quarters, propelling the Chinese brand to second-ranked position in the market, unseating Apple from its perch. However, the network infrastructure side of Huawei has faced increased scrutiny from the United States and other governments around the world, due to potential security concerns in to roll out of 5G networks.


Apple shipped 64.3 million units in Q4 2018, down 16.9 percent from 77.3 million units in Q4 2017. The company’s performance faced significant challenges in China and in the overall global smartphone market in Q4 2018. Furthermore, Apple’s super-premium handset pricing seems to have stunted its unit growth potential in the quarter. Importantly, there is no quick fix for Apple to change fortunes in China or India. In China, local competition is fierce; while in India, Apple’s products are ill-equipped to fit into the country’s price-cautious market.


The recent trend of high double-digit growth halted for Xiaomi in Q4 2018. The company shipped 24.8 million units, down 12.1 percent from 28.2 million units in Q4 2017.

Oppo and Vivo

Oppo and Vivo shipped 26.4 and 25.2 million units, respectively. Oppo shipments declined 3.6 percent, while Vivo shipments grew 7.2 percent.


Xiaomi, Oppo and Vivo were adversely affected by the continued negative growth of the smartphone market in China. On the other hand, Huawei strengthened its market leadership in China. Tension between the US and China stimulated a feeling of patriotism in China, leading smartphone users to choose Huawei over other brands. Moreover, Huawei boasts significant international business – which other brands are still working to establish – enabling the company to achieve tremendous success in the fourth quarter.

The combined market concentration on the top six companies continued to intensify in Q4 2018, accounting for 75 percent of global smartphone shipments. Most of the rest brands saw their shipments and market shares fall in the quarter.

Meanwhile, Nokia increased its shipments to 15 million units in 2018, up from 5 million units in the previous year. Finland-based HMD Global is operating its Nokia-branded smartphone business, by focusing on mid-range and low-end smartphones in Europe, Asia and Africa. The company will soon expand into North America.

Source: IHS Markit – Smartphone Intelligence Service

© 2019 IHS Markit


News like this make Apple’s latest results look good:

"Widening losses in the company’s struggling mobile business also dragged down profit, analysts said.

“LG Electronics’ mobile business has not been generating profits at all. On top of that, high marketing expenses for its slow-selling handset models hurt the overall profit,” said Eo Kyu-jin, an analyst at eBest Investment and Securities."

This makes iPhone’s results look good, and Samsung’s last quarter was about equally disastrous: