Yesterday, Apple released the results for its 2018 fiscal second quarter (which ran from December 31, 2017 to March 31, 2018) and held a call with analysts to discuss the results. Apple's first fiscal quarter is the one with all of the holiday sales, so Q2 is usually not a particular impressive quarter for Apple. In fact, two years ago, Apple had a particularly rough second quarter. In 2018, in contrast, Apple had its best Q2 ever, with record Q2 revenue of $61.1 billion,up from $52.9 billion in 2017 Q2 (and $50.6 billion in 2016 Q2). Apple CEO Tim Cook attributed the record quarter to three factors: iPhone revenue was up 14%, services revenue (things like Apple Music and the App Store) was up 31%, and wearable revenue (things like the Apple Watch and AirPods) was up almost 50%. If you want to get all of the nitty gritty details, you can download the audio from the announcement conference call from iTunes, or you can read a transcript of the call prepared by Seeking Alpha, or a transcript prepared by Mikah Sargent of iMore. Apple's official press release is here. As always, I'm not as interested in the financial details as I am the statements of Apple executives during the call that are of interest to iPhone and iPad users. Here are the items that stood out to me.
- During the past quarter, Apple sold 52.217 million iPhones. The all-time record for Q2 was in 2015 when Apple sold 61.2 million iPhones, but this is the second most iPhones that Apple has ever sold in a fiscal second quarter (up from just over 50 million a year ago).
- By my count, Apple has sold almost 1.4 billion iPhones since they first went on sale in 2007.
- If you combine Apple's over $38 billion in iPhone revenue in Q2 with its over $61 billion in iPhone revenue in 2018 Q1, you get to about $100 billion in iPhone revenue for the first half of 2018, which Cook said was a new record for iPhone revenue in the first half of the year. I'm sure that a big part of the reason for this was that Apple has been selling the iPhone X, its most expensive iPhone ever, during these past two quarters. But whatever the reason, I'm glad that Apple has numbers that it can boast about, because that encourages Apple to continue to develop the iPhone, and encourages smart engineers who work at Apple to stay at the company, all of which results in better iPhones for those of us who use them every day.
- What kinds of iPhones are people buying? Cook said that in the past, the most expensive iPhone was not the best=selling iPhone. In other words, the Plus model of the iPhone 7, iPhone 6, etc. sold less than the non-Plus model. But in this past fiscal quarter, the most expensive iPhone being sold by Apple — the iPhone X — is also the best-selling iPhone.
- Before today's call, there were rumors that the iPhone X was not selling as well as Apple had hoped. Cook addressed this by pointing out what I just mentioned — that the iPhone X was the best-selling iPhone. He also stated: "I think that it's one of those things where, like a team wins the Super Bowl, maybe you want them to win by a few more points, but it's a Super Bowl winner and that's how we feel about it. I could not be prouder of the product."
- John Gruber of Daring Fireball offered this take on iPhone X sales: "Year over year, iPhone sales were up 3 percent on unit sales, but 14 percent on revenue. Unit sales are close to flat, but Apple grew revenue by double digits. There’s no other way to explain it than that iPhone X is a hit."
- Apple sold 9.113 million iPads in the past fiscal quarter. iPad sales were highest for Apple in 2013 to 2015; for example, Apple sold 19.5 million iPads in 2013 Q2. iPad sales have been reduced in recent years, but Apple did sell a few more iPads in 2018 Q2 than it did in 2017 Q2 (when it sold 8.922 million).
- By my count, Apple has sold over 403 million iPads since they first went on sale in 2010.
- To help you to see iPad sales over time, I prepared a chart that shows two things. The blue line shows the actual iPad sales each quarter (in millions). The green bars show the average of the current quarter and the prior three quarters. I think that this chart is useful because while the blue line shows peaks every year in Apple's fiscal first quarter — the holiday quarter, when folks buy lots of iPads as presents — the green bars are more helpful for seeing iPad sales over time. As this chart shows, the iPad was introduced in 2010 and saw a sharp rise in sales until the end of calendar year 2013 (the beginning of Apple's fiscal year 2014). From calendar year 2014 through 2017 Q2, iPad sales have decreased over time. But then iPad sales started to increase again. The increase wasn't very much each quarter, and thus if you look at the last four green bars in this chart, you can only see a slight increase. But it does increase. For four quarters in a row, the four-quarter average of iPad sales has increased every single quarter. I don't know if we will ever see the record iPad sales that we saw a few years ago, but as long as iPad sales continue to increase, Apple will (hopefully) be encouraged to continue to put resources into iPad development. And hopefully that will translate into better iPads for us to use.
- This was Apple's best-ever quarter for services, including the App Store, Apple Music, Apple Pay, iCloud, etc. Because much of this is subscription revenue, these should continue to be profitable areas for Apple in the future.
- Cook noted that more transit systems are accepting Apple Pay, which has increased Apple Pay use by commuters.
- Apple never reveals specific numbers for the Apple Watch, but Cook did say that 2018 Q2 Apple Watch sales were higher than any prior Q2, adding: "Millions of customers are using Apple Watch to help them stay active, healthy, and connected, and they have made it the top selling watch in the world."
- Apple also doesn't release specific numbers for the AirPods, but Cook said that the product is a "runaway hit."
- Of course Tim Cook was not going to reveal any new products coming in the future, but Cook did show his excitement for the future, noting: "We have the best pipeline of products and services we've ever had. We have a huge installed base of active devices that is growing across all products, and we have the highest customer loyalty and satisfaction in the industry."
- One analyst asked Tim Cook whether Apple's emphasis on user privacy was a focus because it could help Apple's revenue. Cook pushed back and said that Apple doesn't see it that way. "In terms of benefit, we don't really view it like that. We view that privacy is a fundamental human right and that it's an extremely complex situation, if you're a user, to understand a lot of the user agreements and so forth. And we've always viewed that part of our role was to sort of make things as simple as possible for the user and provide them a level of privacy and security."